Bassam Fattouh

Director

Dr. Bassam Fattouh is the Director of the Oxford Institute for Energy Studies and Professor at the School of Oriental and African Studies, University of London. He specialises in international oil pricing systems, OPEC pricing power, security of Middle Eastern oil supplies, and the dynamics of oil prices and oil price differentials. He has published a variety of articles on oil and gas topics and his publications have appeared in academic and professional journals. Dr. Fattouh served as a member of an independent expert group established to provide recommendations to the 12th International Energy Forum (IEF) Ministerial Meeting for strengthening the architecture of the producer-consumer dialogue through the IEF. He also acts as an adviser to governments and industry, and is a regular speaker at international conferences.

Areas of ExpertiseBassam Fattouh focuses his research on aspects of the international oil pricing system such as the relationship between the futures market and spot market, the relationship between OPEC and the market, the causes of oil price volatility and the dynamics of oil price differentials. He also focuses his research on the IOC-NOC relationship and its implications for investment behaviour. He has a strong background in the economic environment of the Middle East.

As OPEC’s Declaration of Cooperation with non-OPEC producers draws to a close (ending-2018), the future of this historic joint effort of 24 (now 25) OPEC and non-OPEC oil-producing countries has moved to the top of the producers’ agenda. The next Joint Ministerial Monitoring Committee’s meeting on September 23rd in Algiers, could provide some hints regarding the future of the cooperative framework between the producers. Although OPEC and non-OPEC producers have collaborated in the past, albeit on a smaller scale, the Declaration of Cooperation has been a landmark agreement due to its success in meeting the many challenges faced in its planning, coordination and monitoring – at least in the short-term. Assessing its effectiveness beyond compliance levels and evaluating the dynamics underlying the success of the Agreement’s current framework as well as its members’ need for institutionalising a long-term cooperative framework, is of paramount importance for understanding what lies ahead and why oil policy will continue to matter in years to come. This Energy Comment discusses 5+1 key facts about the Declaration of Cooperation that shed light on the prospects and challenges in OPEC/NOPEC producers’ pursuit of cooperation.

[post_title] => 5+1 Key Facts about the OPEC Declaration of Cooperation
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[post_date] => 2018-09-04 11:08:41
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[post_content] => This presentation discusses the oil market outlook for 2018 and 2019. It outlines the main factors behind the rebalancing of the oil market, including stronger than expected global oil demand growth and strong OPEC cohesion (caused in part due to involuntary cuts). The presentation then analyses the main trends shaping oil price outcomes in the short-term, including prospects for the global economy amidst growing concerns about escalating trade tensions and the health of emerging economies, US shale supply dynamics in the face of infrastructure constraints, OPEC behaviour, the recent shifts in crude oil trade flows and geopolitical disruptions. The presentation concludes with an analysis of the balance of risks facing the oil market and how the disconnections between short-term and long-term expectations are clouding the oil price outlook.
[post_title] => The Crude Oil Market in 2018 & 2019 - How Did We Get Here & What Next?
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[post_date] => 2018-08-21 12:21:05
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[post_content] => After a sharp rise in April/May this year, which saw Brent trading at above $80/barrel for several days, the upward pressure on the oil price eased in July with the Brent structure flipping into contango. This may have come as a surprise to many analysts who were expecting oil prices to continue on their upward trajectory. Because, after all, with OECD stocks falling below the five-year average, spare capacity at very thin levels, oil demand still growing robustly, production in Venezuela continuing its decline, supply losses from Iran projected to exceed 1 million b/d, and general deterioration of the geopolitical backdrop, surely the Brent price should have broken the $80/barrel ceiling? Instead, the oil price has held in the $70-$75/barrel range for most of July and into August 2018. While fears of trade wars and growing concerns about the health of emerging markets have impacted sentiment, it is the recent shift in OPEC, and particularly its dominant player Saudi Arabia’s, output policy which has had the biggest impact on physical balances, prices and the term structure to date. This reflects in part changing market fundamentals and a more uncertain environment, but also changes in the weight attached to the various objectives pursued by the Kingdom. This comment examines the causes of the most recent shift in Saudi oil policy, its adjustment in output in July, and the implications of recent behaviour on its signaling power.
[post_title] => What to Make of Saudi Arabia's Recent Shift in its Output Policy?
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[post_date] => 2018-08-15 11:57:29
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[post_content] => Economic diversification has been a key developmental goal for the Middle East and North Africa (MENA) oil producers for decades as evidenced in their various national development plans. Some countries have made progress over the last few decades in diversifying their economic base and their sources of income. But despite these efforts, most indicators of economic complexity, diversity, and export quality continue to be lower in oil-exporting Arab economies than even in many emerging market economies, including commodity exporters in other regions.
Of late, a renewed sense of urgency has arisen around the issue of economic diversification. The conventional wisdom that dominated oil market behaviour over the past few decades has been based around the idea of ‘peak oil supply’ and ‘scarcity rents’, and that preserving resources for the future by rationing supplies provided a sensible way of managing a country’s oil fairly across generations. The pendulum has swung to the notions of ‘peak oil demand’ and ‘oil abundance’ – where the pace of oil demand growth is expected to slow over time and eventually plateau/decline, resulting in stranded assets. It is generally thought that the world is on the brink of another ‘energy transition’ in which conventional energy sources such as oil will eventually be substituted away in favour of low or zero carbon energy sources.
Rather than debating its definition or measurement, this presentation adds context to the debate on economic diversification, by analysing it against the arguments around peak oil demand and the energy transition – it looks at three questions: how soon can we expect ‘peak oil demand’ to occur, or alternatively, how fast is the current ‘energy transition’? What kind of economic future should MENA countries be planning for? And, how does the emergence of renewables as a competitive energy source impact economic diversification strategies in these countries?
The presentation argues that the starting point of any analysis of MENA oil exporting countries should not be based on an approach solely predicated upon the premise that oil will no longer be in demand and that the oil sector will play a marginal role. The diversification strategy adopted by oil exporting countries will be conditioned by the speed of the energy transition, during which the oil sector will continue to play a key role in these economies including in their diversification efforts. At the same time, oil producers will need to be far more strategic in their use of the energy sector to diversify their economies. In a more competitive world, oil policy will also continue to matter; cooperation between oil producers will be imperative, yet challenging.
Executive Summary
[post_title] => Economic Diversification in the Context of Peak Oil and the Energy Transition
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[post_date] => 2018-07-17 09:20:07
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Earlier this month, Saudi Aramco announced that from October 2018 it will be changing the pricing formula it uses to price its long-term crude oil sales to Asia. Rather than using the equally weighted average prices for Dubai and Oman as assessed by pricing agency S&P Global Platts (referred to in this article as Platts Dubai and Platts Oman), Saudi Aramco will replace Platts Oman in the formula with the marker price of the Oman Crude Futures Contract traded on the Dubai Mercantile Exchange (referred to as DME Oman). In terms of pricing, the market will barely feel the difference, as historically Platts Oman and DME Oman have been closely aligned with very little difference on a daily basis. Nevertheless, this recent change could still represent a major shift, as it is the first time that Saudi Arabia, the Middle East’s biggest crude producer and exporter, has shown willingness to implement a change to its Official Selling Price (OSP) to Asia since the mid-1980s, in an attempt to reassert some influence over the crude pricing mechanism and the oil price discovery process. This article puts the recent change in context and discusses some of the main drivers behind this change arguing that Saudi Arabia’s recent adjustment to its pricing formula reflects, in part, recent structural transformations in the oil market and trade flows, together with a growing interdependency between Asia and the Middle East, and thus may indicate that more radical changes could be on the way, though the timing of any potential changes remains highly uncertain.

[post_title] => What Next for Asian Benchmarks?
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[post_date] => 2018-06-25 10:45:16
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[post_content] => Resource-rich economies in the Middle East and North Africa (MENA) are pursuing two parallel strategies with regard to their electricity sectors: (i) increasing the role of renewables and integrating them into their power generation mix to mitigate the impact of rising domestic oil and gas demand on their economies and to boost their hydrocarbon export capacities; and (ii) conducting power sector reforms to attract investment in generation capacity and networks, remove subsidies, and improve operational efficiency. These goals imply that the design of power sector reforms (including regulations governing wholesale and retail markets and networks) needs to be carried out with a view to the possibility of a rising share of non-dispatchable resources. The lack of an integrated approach to simultaneously address these two strategies is likely to lead to several misalignments between renewables and the various components of future electricity markets, when the share of intermittent resources increases in the generation mix. The key challenge is that the ‘ultimate model’ that will reconcile these two goals (liberalization and integrating renewables) is as yet unknown, and is still evolving due to uncertainties around the development of technologies, institutions, and consumer preferences. We argue in this paper that resource-rich MENA countries can, however, move towards adopting a transition model of electricity markets, the individual elements of which can eventually be adapted to suit either centralized or decentralized future electricity sector outcomes. We outline the key components of this model for the wholesale market, retail market, and network regulation, considering the objectives of governments and the specific contexts of the region.​
[post_title] => Electricity Markets in MENA: Adapting for the Transition Era
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[post_date] => 2018-06-18 11:24:55
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[post_content] => As the OPEC oil ministers prepare to meet for their bi-annual Ordinary Meeting on 22 June, they are faced with some difficult choices. On the one hand, by extending the output cutbacks amidst a higher risk of output disruptions, OPEC risks overtightening the oil market and pushing oil prices higher, leading to an inevitable demand response. Moreover, involuntary cuts originating mainly from Venezuela, Angola, and Mexico mean that the oil market is tightening more quickly than anticipated. On the other hand, by exiting the agreement too early OPEC runs the risk of prices falling if such a decision is not supported by favourable market conditions, especially as ‘the clouds over the global economy are getting darker by the day’, and risks dismantling a historic coalition of OPEC/NOPEC producers which took massive diplomatic efforts to put together and the coordination of which proved critical for the rebalancing effort. In this Energy Insight, we consider the hard realities of oil market and price dynamics for 2018 and 2019 to derive, analyse, and assess, oil output policy scenarios that are likely to drive discussions during the upcoming OPEC Ministerial Meeting, through the lens of a structural VAR model of the global oil market.
The decision for OPEC members that have the capacity to increase production is not only whether or not to increase output, but also by how much to increase production and whether to do it incrementally. Our results call for a cautious approach in which OPEC increases output gradually and reassess its options in November as this will help keep a solid floor on the oil price, which remains a key objective for all producers. We also find that future oil demand growth (especially in 2019) hinges heavily on the outcome of the upcoming OPEC+ meeting, just as the success of its oil output policy hinges heavily on the prospects of global oil demand remaining healthy. Finally, how OPEC decides to implement the output increase also matters. If the decision is to increase output, then it is in the best interest of OPEC+ to reach a collective decision, however this may not be feasible in the current context as the producers who don’t have the capacity to increase production and those who are subject to US sanctions are likely to refuse a recommendation to increase output. If it is not possible to reach a collective agreement on increasing output, the producers who have the capacity, and who could really influence market outcomes are then faced with three options: either to extend the current agreement of output cuts in order to maintain the cohesiveness of the coalition and risk the impact of higher oil prices on demand; exit the deal altogether and announce that they will increase their output regardless of the actions of other producers, bringing to an end the framework of cooperation; not dismantle the OPEC+ deal in the next meeting and postpone the difficult negotiations until November, while still going ahead and increasing output individually.
While the last two options are not very different in terms of their impact on market balances, the choice of exit will affect sentiment and prices at least in the short-term. This shows the balancing role that OPEC has to play and the importance the key players should attach to retaining their flexibility.
Executive Summary
[post_title] => OPEC at the Crossroads
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[post_date] => 2018-05-29 10:58:01
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[post_content] => The energy landscape is changing rapidly with far-reaching implications for global energy industries and actors, including oil companies and oil-exporting countries. These rapid changes introduce uncertainty in multiple dimensions, the most important of which is the speed of transition. While the transformation of energy systems is rapid in certain regions of the world, such as Europe, the speed of global energy transition remains uncertain. It is also difficult to define the end game (which technology will win and what the final energy mix will be), as the outcome of transition will vary across regions. A key issue facing oil companies and oil-exporting countries is how they should now position themselves and how best to be part of the renewables ‘revolution’. For oil companies, moving beyond their core business is risky, but a ‘wait-and-see' strategy could be costly, therefore oil companies need to gradually ‘extend’ their business model and rather than a complete shift from hydrocarbons to renewables, they should aim to build an integrated portfolio which includes both hydrocarbon and low-carbon assets. The strategies designed to make this happen need to be flexible and able to evolve quickly in response to anticipated changes in the market. For oil-exporting countries, with subsidized prices and rising domestic energy consumption, there is no conflict between investing in renewables and in hydrocarbons as these countries can liberate oil and gas for export markets, improving the economics of renewables projects. In the long run, however, the main challenge for many oil exporting countries is economic diversification as it is the ultimate safeguard against the energy transition. Whether or not these countries succeed in their goal of achieving a diversified economy has implications for global energy markets and the speed of global energy transformations. In other words, the global energy transition will not only shape political and economic outcomes in oil-exporting countries, but the transformations in these major oil-exporting countries will, in turn, shape the global energy transition - adding another layer of uncertainty to the already complex phenomenon of energy transition.
[post_title] => The rise of renewables and energy transition: what adaptation strategy for oil companies and oil-exporting countries?
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[post_date] => 2018-05-22 13:10:36
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[post_content] => Recent movements in oil prices, time spreads, and physical differentials have been sending some mixed signals both about current and long-term market fundamentals. This may reflect heightened uncertainty as well as a wide divergence of expectations about key factors shaping the oil market, both in the short-term and the medium-term, including the size of potential output losses from Iran following the US withdrawal from the nuclear deal, how low Venezuelan oil production may go, whether OPEC+ will exit the deal anytime soon, the potential impact of the recent oil price increases on oil demand growth, and whether the market will face a supply crunch in the next couple of years due to lack of investment. Over time, some of these key uncertainties will be resolved and the price signals may converge towards a more ‘coherent’ story with movements in price levels, the back end of the futures curve, time spreads and physical differentials all pointing in the same direction. This, however, may take time and the adjustment mechanism remains unclear and so for now the various market players have little choice but to navigate through mixed price signals, some sharp disconnections between price levels, time spreads and physical differentials and between short-term and long-term expectations.
[post_title] => The Oil Market's Mixed Price Signals
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[post_modified] => 2018-05-22 16:15:27
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[post_date] => 2018-05-15 11:27:28
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[post_content] => President Trump’s recent decision to exit the Joint Comprehensive Plan of Action (JCPOA) and the expectation therefore of the loss of Iranian barrels has brought the fate of the OPEC+ deal to the fore. For some analysts, this signifies that ‘the current OPEC deal will end by end-2018’ while for others the impact may be felt as soon as the next OPEC meeting in June this year, as it will ‘no longer be about extending the production cuts, but rather about when to start raising output gradually’. At the other end of the spectrum, some argue that ‘there is no pressure from within the group to bring their cooperation to an end’ and the ‘deal will run until the end of 2018 and could be extended again if participants don’t believe that the market has been rebalanced’. These very different views reflect the hard choices that OPEC, and its dominant player Saudi Arabia, faces in a more uncertain and geopolitically charged market. On the one hand, Saudi Arabia welcomed Trump’s decision to scrap the Iran nuclear deal and showed its willingness to meet any supply shortages, assuring the market that it has enough oil production to ‘maintain oil market stability’. On the other hand, Saudi Arabia is committed to ‘rebalancing’ the market (which in OPEC’s view has not yet been achieved) and would continue to do so in cooperation with other producers (some of whom are opposed to Trump’s decision to exit the Iran deal) and therefore will not act unilaterally to offset any shortage. Given these multiple objectives, Saudi Arabia needs to engage in a delicate balancing act and hence the decision to terminate the OPEC+ deal is not as straightforward and binary as it is often portrayed. Issues such as the timing of any potential response to Iranian output loss, the type of the response (unilateral or collective), and the way producers decide to exit the deal (assuming that they decide to terminate the output cut agreement) are all important in shaping oil market and price outcomes. This comment explores some of the key factors that may shape OPEC+ decisions in the next few months.
[post_title] => Is this the end of the OPEC+ deal?
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[post_date] => 2018-05-02 11:17:42
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[post_content] => In this presentation, Bassam Fattouh and Andreas Economou analyse the choices facing OPEC+ in light of OECD stocks falling, recent gains in oil prices, alongside concerns that OPEC may be over-tightening the market and with commentators warning that current high oil prices will have a negative impact on oil demand and suggesting that OPEC+ should release withheld barrels back into the market to put a cap on the oil price.
While OPEC+ should always be wary about the potential supply/demand responses in a higher oil price environment and should show willingness to act both on the upside and the downside, we argue that indicators based on stocks should not be its only guide for output policy and that stock movements should be seen merely as symptoms of underlying oil supply and oil demand shocks hitting the market.
The fact that the market, and the media, as well as producers themselves would prefer to rely on ‘simple’, ‘measurable’ and ‘observable’ indicators, and that indicators based on shocks are highly uncertain as well as difficult to measure, does not mean that OPEC+ should not consider alternative and more complex metrics in their decision making.
We consider OPEC+ exit strategy under different scenarios with price outcomes ranging from $80/b year-end to an average price of $50/b. It is perhaps this wide range of price outcomes, which may explain OPEC+ reluctance to exit the deal, especially given the time taken and the difficulties faced in concluding the output cut agreement and what makes it even more difficult for OPEC+ is that their decisions are endogenous and how they decide to act now will, in turn, shape market outcomes adding another layer of uncertainty.
Executive Summary
[post_title] => Oil Price Signals: What Next for OPEC+?
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[post_name] => oil-price-signals-next-opec
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[post_content] => OPEC exit strategy has been one of the key uncertainties engulfing the oil market. Most market focus has been on the level of inventories, as this is seen by many as a key indicator as to when OPEC may shift its current output policy. In this presentation, it is argued that the level of inventories, however measured, is a backward looking indicator, and hence is of little use for guiding OPEC’s next steps. Instead, through thorough analysis of the previous cycles we show that in the presence of a new source of supply, which is highly responsive to price signals, demand related shocks become much more important in shaping OPEC behaviour. The high output strategy adopted in 2015 was undermined by a negative demand shock. The current strategy of cutting output has succeeded in large part due to a strong positive demand shock, which caused inventories to continue to decline despite strong US shale response. Thus, the risks of potential ‘trade wars’ and the potential negative impact on the global economy and on oil demand if these risks do materialise should constitute a serious concern for OPEC. OPEC’s current strategy hinges heavily on the prospects of future demand growth. If demand continues to surprise on the upside (positive demand shock), then OPEC will most likely maintain its strategy and may decide to release some of the withheld crude back to the market. If demand surprises on the downside (negative demand shock), then OPEC’s choices become very stark: OPEC could either decide to cut output to support prices or shift toward a higher output strategy. Both choices carry hefty risks reflecting the delicate situation that OPEC finds itself in as a result of the shift in policy back in November 2016.
Executive Summary
[post_title] => Oil Supply Balances: The Four Cycles of the OPEC Oil Output Policy
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[post_modified] => 2018-04-06 11:18:20
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[post_author] => 111
[post_date] => 2018-02-22 10:29:03
[post_date_gmt] => 2018-02-22 10:29:03
[post_content] => In this presentation, given at IP Week, Bassam Fattouh discusses the heightened geopolitical risks in the Middle East and North Africa (MENA) and the potential impacts, both short-and long-term, on oil and gas markets. He argues that the nature of geopolitical risks in the region has changed dramatically and that despite the defeat of the so called Islamic State (IS), overall there has been a general deterioration in the geopolitical backdrop as old conflicts resurface and new risks emerge, including the fragmentation of some states, the rise of non-state actors and local power centers, consolidation of power and more assertive foreign policy from the world’s top oil exporter, and heightened confrontation between regional and international powers.
Despite this general deterioration in the geopolitical backdrop, the short-term impacts on oil and gas markets have been muted. Unplanned outages from MENA have been limited in the last two years, and the recovery of Libyan output (though from very low levels), as well as the resumption of Iranian exports after the lifting of sanction meant that despite the high compliance from key Middle East oil exporters to the OPEC/NOPEC deal, supply from MENA declined only marginally in 2017. The deteriorating geopolitical backdrop did not preclude OPEC, and its members, and Russia from reaching an agreement to cut oil output and pursue further cooperation. At times when stocks were high, and given the limited output losses so far, the market has barely reacted to geopolitical flashpoints from the region in the last few years. Having said that, the geopolitical backdrop is having a more subtle longer-term impact on MENA’s long-term oil capacity, preventing some countries from expanding their oil and gas productive capacity (Iran, Libya, KRG), which raises a key question as to whether some of the lowest cost producers in the region will be in a position to develop their reserves faster than higher cost producers. Heightened regional confrontation has also meant higher defense and military expenditure and hence the need for higher oil prices at times when most countries are embarking on very ambitious plans to reform, diversify, and open their economies. Looking ahead, as the crude and products overhang gets eroded and as spare capacity becomes thinner (especially when compared to global oil consumption), geopolitical flashpoints in the Middle East will have a bigger impact on markets, though the short-term impact on prices is expected to remain small in the current market context in the absence of a supply disruption from a large oil exporter.
[post_title] => Heightened Geopolitical Risks in the Middle East and Potential Impacts on Oil Markets
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
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[post_password] =>
[post_name] => heightened-geopolitical-risks-middle-east-potential-impacts-oil-markets
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[post_modified] => 2018-02-22 10:29:03
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[17] => WP_Post Object
(
[ID] => 30863
[post_author] => 111
[post_date] => 2018-02-13 11:41:06
[post_date_gmt] => 2018-02-13 11:41:06
[post_content] => 2018 started on a positive note for oil markets with Brent prices breaking through $70 a barrel for a few days and all the key international crude oil benchmarks flipping into backwardation. Yet, there is still a wide uncertainty engulfing the oil market, with very divergent views among market observers about how the oil price path could evolve in 2018, with some revising upwards their forecasts to higher than $80/b while others are less convinced that the market fundamentals can sustainably support a price above $70/b, expecting a lower path in the mid $60/b. The key uncertainties behind these divergent views mainly pertain to different views about:

The OPEC/NOPEC exit strategy from the output cut agreement reached in November 2016;

US shale supply response to the recent oil price rise;

The potential impact of higher oil prices on global oil demand;

The extent of supply disruptions amid a fragile geopolitical environment.

In this Energy Insight, we analyse how the oil price path could evolve in 2018 by evaluating the aforementioned risks underlying the world oil market using a structural model of the oil market and considering various forecast scenarios. Forecast scenarios are not predictions of what will happen, but rather modelled projections of various oil price risks conditional on certain events that are known at the time of the forecast or some other hypothetical events. Our reference forecast scenario projects for Brent to trade within a narrow price range, with a price floor at above $60/b and a ceiling of below $75/b, with a 2018 average price of $67/b. The baseline forecast suggests that the momentum of stronger than expected oil demand and the OPEC/NOPEC output cuts have tightened the oil market in 2017 and even with no change in current market dynamics, the oil price will continue to be supported at around $65/b. Our results show that for 2018, US shale output growth will be the key factor putting a ceiling on the oil price, while supply disruptions could provide some support to the oil price, with a sharp fall in Venezuelan output constituting the biggest geopolitical risk that could push prices well above our baseline or reference forecasts. The results also show the paramount importance for the strong oil demand momentum experienced in 2017 to continue in 2018 for rebalancing the market and supporting the oil price. Finally, our results show that for OPEC/NOPEC to maintain the recent price gains, they have to extend their output cut until the end of 2018; releasing the withheld barrels under the current agreement would result in a sharp fall in oil prices, suggesting that OPEC/NOPEC should be very wary about unwinding the output cut agreement when they next meet in June 2018.
[post_title] => Oil Price Paths in 2018: The Interplay between OPEC, US Shale and Supply Interruptions
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => oil-price-paths-2018-interplay-opec-us-shale-supply-interruptions
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[post_modified] => 2018-02-13 11:41:06
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[18] => WP_Post Object
(
[ID] => 30852
[post_author] => 111
[post_date] => 2018-02-06 10:24:08
[post_date_gmt] => 2018-02-06 10:24:08
[post_content] => While the market has been focused on short-term issues such as OPEC’s success in rebalancing the market in 2018; its exit strategy after the expiry of the deal; and the risk that the market over-tightens, OPEC and its dominant player Saudi Arabia have been keen to shift the market focus towards the longer term. The key message that emerged from the latest OPEC/Non-OPEC Joint Ministerial Monitoring Committee is that producers shouldn’t limit their efforts to 2018 and instead should aim to extend the declaration of cooperation beyond 2018 in order to assure ‘stakeholders, investors, consumers and the global community that this is something that is here to stay’, and that producers ‘are going to work together’ within a longer framework for cooperation. The latest signal is a very powerful one as it signifies that Saudi Arabia is not only interested in the short-term rebalancing of the market, but is also keen to stabilise long-term expectations about long-run oil prices; and producer behaviour at times of increased supply and demand uncertainty and during structural transformation in the market. In a world in which many are expecting oil demand to peak in the next few decades, the monetization of oil reserves as quickly as possible is being presented as the only ‘rational’ policy for low-cost producers, if they are to avoid holding stranded assets or failing to maximize their long term revenues. This scenario, in which producers compete for market share, is extremely bearish for oil markets both in the long and the short term, as long-term expectations will eventually feed into short-term expectations. It is in this context that Al-Falih’s signal is important: it charts an alternative route in which oil producers would continue to cooperate and restrain output, even as the oil market becomes more competitive. While Saudi Arabia is charting for the market an alternative story based on cooperation with other producers lasting ‘decades and generations’, the challenges it faces are immense: maintaining cooperation in a more competitive world is very challenging and while producers have the incentive to cooperate, the cooperation between producers needs to take a different shape. For instance, producers should not only be concerned with low oil prices, but also be proactive when prices are too high, as high oil prices induce strong supply and demand responses. But this does not imply that cooperation is not possible or sustainable: As long as their economies are not diversified, the alternative of non-cooperation is also not sustainable. The market is yet to fully internalize the signal and will be looking closely as to whether the Kingdom will follow up with concrete steps to turn the signal into a credible strategy.
[post_title] => Saudi Arabia: Shifting the Goal Posts
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => saudi-arabia-shifting-goal-posts
[to_ping] =>
[pinged] =>
[post_modified] => 2018-02-06 10:24:08
[post_modified_gmt] => 2018-02-06 10:24:08
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=30852
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[19] => WP_Post Object
(
[ID] => 30835
[post_author] => 111
[post_date] => 2018-01-24 10:29:38
[post_date_gmt] => 2018-01-24 10:29:38
[post_content] => It is often implied that economic adjustments and structural reforms are very difficult in the context of rentier economies. Yet recent experience shows that in response to the declines in oil price and uncertainties surrounding oil markets, GCC countries have been able to introduce some limited reforms with relative ease and, so far, without much public opposition. Perhaps most visible are the recent energy price increases in Saudi Arabia. While low energy prices are associated with wide distortions, inefficiencies and inequities, increasing domestic energy prices without introducing compensation measures has both direct and indirect adverse impacts on households’ welfare. In Saudi Arabia, low energy prices have another dimension, as they have been central to the country’s industrialization strategy, which is based on the competitiveness of energy intensive industries such as petrochemicals, aluminum and steel. In this presentation given at the Oxford Centre for Islamic Studies, Bassam Fattouh addresses the following key questions:

How deep have the recent energy price increases in Saudi Arabia been?

Can these reforms be accelerated without the government facing serious public opposition? What are some of the policies that governments can pursue to increase the acceptability of energy price reforms?

Can energy price reforms (and economic reforms more generally) be implemented without greater accountability and openness?

The presentation addresses these questions in the context of changing international and domestic scenes and makes the following observations. First, the sustainability of energy pricing reforms is highly dependent on developing effective social safety nets and cash transfer schemes, which in turn depends on the quality of the implementation of these schemes and the institutions involved. Second, the energy sector will continue to play a key role in the Saudi economy and therefore energy intensive industries are key in shaping the energy pricing reform agenda going forward, with the price of industrial fuels expected to rise gradually and to levels that ensure industrial competitiveness. Finally, the relationship between economic and political opening is complex: economic reform may not necessarily bring political reform; and social openness is not necessarily a substitute for successful economic reforms which are needed to generate wealth and jobs for young people, the new power base for the new leadership.
[post_title] => Saudi Arabia's Energy Pricing Reform in a Changing Domestic and Global Context
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => saudi-arabias-energy-pricing-reform-changing-domestic-global-context
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[pinged] =>
[post_modified] => 2018-01-24 10:29:38
[post_modified_gmt] => 2018-01-24 10:29:38
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=30835
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[20] => WP_Post Object
(
[ID] => 30822
[post_author] => 111
[post_date] => 2018-01-15 12:00:17
[post_date_gmt] => 2018-01-15 12:00:17
[post_content] => The prospect that global oil demand will gradually slow and eventually peak has created a cottage industry of executives and commentators trying to predict the point at which demand will peak. In this Energy Insight, we argue that this focus seems misplaced. The date at which oil demand will stop growing is highly uncertain and small changes in assumptions can lead to vastly different estimates. More importantly, there is little reason to believe that once it does peak, that oil demand will fall sharply. The world is likely to demand large quantities of oil for many decades to come. Rather, the significance of peak oil is that it signals a shift in paradigm – from an age of (perceived) scarcity to an age of abundance – and with it is likely to herald a shift to a more competitive market environment. This change in paradigm is also likely to pose material challenges for oil producing economies as they try both to ensure that their oil is produced and consumed, and at the same time diversify their economies fit for a world in which they can no longer rely on oil revenues to provide their main source of revenue for the indefinite future. We argue that the extent and pace of this diversification is likely to have an important bearing on oil prices over the next 20 or 30 years. It seems likely that many low-cost producers will delay the pace at which they adopt a more competitive “higher volume, lower price” strategy until they have made material progress in reforming their economies. In particular, in reducing the “social costs” of oil production associated with using oil revenues to finance many other aspects of their economy, such as health care provision or public sector employment. More generally, it seems unlikely that oil prices will stabilise around a level in which many of the world’s major oil producing economies are running large and persistent fiscal deficits. As such, the average level of oil prices over the next few decades is likely to depend more on developments in the social cost of production across the major oil producing economies than on the physical cost of extraction.
[post_title] => Peak Oil Demand and Long-Run Oil Prices
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => peak-oil-demand-long-run-oil-prices
[to_ping] =>
[pinged] =>
[post_modified] => 2018-01-15 12:00:17
[post_modified_gmt] => 2018-01-15 12:00:17
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=30822
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[21] => WP_Post Object
(
[ID] => 30761
[post_author] => 111
[post_date] => 2017-12-07 09:50:22
[post_date_gmt] => 2017-12-07 09:50:22
[post_content] => Using novel measures that decompose oil supply shocks into its exogenous supply (driven by exogenous geopolitical events in OPEC countries) and endogenous supply (driven by investment dynamics within the oil sector) components, this paper offers a fresh perspective on the role of supply, flow demand and speculative demand shocks in explaining the changes in the real price of oil over the last three decades. We show that while exogenous supply shocks are non-negligible, endogenous supply shocks have generated larger and more persistent price responses than previously thought. Earlier studies have consistently shown that positive shifts in the flow demand for oil were responsible for most of the oil price surge between 2002-2008. But this paper shows that endogenous production capacity constraints, which restricted the ability of producers to ramp up production to meet the unexpected increase in demand, added at least $50/barrel to the real price of oil during that period. More recently, endogenous oil supply shocks alone accounted roughly for twice as much as any other supply or demand shock in explaining the 2014 oil price collapse. Specifically, of the $64 per barrel cumulative decline in the real price of oil from June 2014 to January 2015, our model estimates that $29 have been due to endogenous oil supply shocks, $13 have been due to exogenous oil supply shocks, and $12 have been due to flow demand shocks. The paper concludes by demonstrating that forecasting models that are able to distinguish between exogenous and endogenous supply shocks generate more realistic out-of-sample estimates of the sequences of the structural shocks, thus resulting in higher real-time predictive accuracy than forecasting models that use a collective measure of a flow supply shock.
Full paper
[post_title] => A Structural Model of the World Oil Market: The Role of Investment Dynamics and Capacity Constraints in Explaining the Evolution of the Real Price of Oil
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => structural-model-world-oil-market-role-investment-dynamics-capacity-constraints-explaining-evolution-real-price-oil
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[pinged] =>
[post_modified] => 2017-12-07 09:55:31
[post_modified_gmt] => 2017-12-07 09:55:31
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[22] => WP_Post Object
(
[ID] => 30755
[post_author] => 111
[post_date] => 2017-11-29 10:34:21
[post_date_gmt] => 2017-11-29 10:34:21
[post_content] => Oil market sentiment has shifted considerably over the last few weeks. Brent is trading above $60 per barrel, the major benchmarks are in backwardation, stocks have been falling towards the five-year average, global oil demand remains strong, financial positioning is at record length, OPEC and non-OPEC compliance has been high, the additional Nigerian and Libyan barrels have been absorbed into the market, geopolitical risks have heightened, multiple disruptions have occurred recently, and OPEC supply risks outside the core Middle East are tilted to the upside. So OPEC seems to be in the controlling seat, or is it? It is at these critical junctures that OPEC and its most important player, Saudi Arabia, face some very hard choices. While OPEC has reasserted some control of the market in the last few months, the room for manoeuvring is getting tighter and tighter. The context in which OPEC operates has been dramatically transformed. One key question that OPEC has to continuously grapple with is whether there is a ‘sweet’ oil price range that does not endanger the prospects of global oil demand while at the same time keeping a lid on oil supply growth, so the market remains in balance. This short article discusses the challenges that OPEC faces in identifying such a sweet price range.
[post_title] => OPEC's Hard Choices
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => opecs-hard-choices
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-29 10:34:21
[post_modified_gmt] => 2017-11-29 10:34:21
[post_content_filtered] =>
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=30755
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[23] => WP_Post Object
(
[ID] => 30658
[post_author] => 111
[post_date] => 2017-10-04 11:12:53
[post_date_gmt] => 2017-10-04 10:12:53
[post_content] => Oil rents have been central to shaping the political economy of the Gulf Corporation Council (GCC) countries. The basic analytical framework for analyzing the impacts of rents remains the Rentier State Theory (RST) despite some important refinements to this theory over the years. However, an area that has received little attention in the literature is the process of economic adjustment and reforms in the context of a rentier economy, where it is often argued that governments cannot embark on reforms without undermining the social contract between the ruling families and the citizens, increasing the risk of social and political unrest. Yet recent experience shows that in response to the recent sharp decline in the oil price, the GCC countries have introduced some limited reforms/adjustment measures such as increasing energy prices with relative ease and without much public opposition so far. This may suggest that social contract is more resilient than originally thought and extends beyond what is implied by RST. This presentation tries to answer following three questions:

How deep have these recent reforms been?

Can these reforms be accelerated without the governments facing serious public opposition? Can compensation schemes make the reforms more acceptable?

Can these reforms be implemented without greater accountability?

[post_title] => Economic Adjustment and Reform in the Context of a Rentier State
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => economic-adjustment-reform-context-rentier-state
[to_ping] =>
[pinged] =>
[post_modified] => 2017-10-04 11:12:53
[post_modified_gmt] => 2017-10-04 10:12:53
[post_content_filtered] =>
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=30658
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[24] => WP_Post Object
(
[ID] => 30652
[post_author] => 111
[post_date] => 2017-09-28 09:25:08
[post_date_gmt] => 2017-09-28 08:25:08
[post_content] => Bassam Fattouh presents on the Middle East Refining Scene & Oil Product Balances at Platts Refining Summit, September 2017.
[post_title] => The Middle East Refining Scene and Oil Product Balances
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => middle-east-refining-scene-oil-product-balances
[to_ping] =>
[pinged] =>
[post_modified] => 2017-09-28 09:25:08
[post_modified_gmt] => 2017-09-28 08:25:08
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[25] => WP_Post Object
(
[ID] => 30433
[post_author] => 111
[post_date] => 2017-06-07 14:58:51
[post_date_gmt] => 2017-06-07 13:58:51
[post_content] => Earlier this week, Saudi Arabia, the UAE, Bahrain and Egypt cut diplomatic and economic ties with Qatar, accusing Qatar of supporting extremism. The measures are of unprecedented severity in modern GCC diplomacy with adverse consequences for Qatar, not least for its reputation as a business and international and regional transit hub and as host for international events, including the 2022 World Cup. While efforts at mediation are underway, it will be difficult to bridge the gap between Qatar and Saudi Arabia and its closest allies. At the root of the dispute is a fundamental difference in foreign and regional policy. Further escalation is unlikely, but the dispute will not be resolved anytime soon - unless Qatar makes some very painful concessions. Therefore, oil and gas markets should prepare for a flow of headline news, which could induce erratic volatility, despite the impact of the current escalation on oil and gas market fundamentals being rather limited. We expect no impact on oil market balances and there is no indication that Qatar’s exports of LNG, oil or NGLs will be impeded, though we could witness some redirection of LNG trade flows. While the impacts of the current escalation on energy markets are likely to be limited, the same can’t be said for the stability of the Middle East. The region is already undergoing a ‘regional’ civil war, which has fragmented countries, created new geographical boundaries, weakened the authority of central governments and increased the power of non-state actors. The current rift within the GCC, if not contained, will only amplify the ‘regional’ civil war, increasing the risk of further fragmentation, more intense proxy conflicts, and higher instability, which, whilst it may not have a direct impact on immediate oil and gas supplies, may well impact the long-term productive potential of the region.
[post_title] => Feud Between Brothers: the GCC rift and implications for oil and gas markets
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => feud-brothers-gcc-rift-implications-oil-gas-markets
[to_ping] =>
[pinged] =>
[post_modified] => 2017-06-07 16:29:09
[post_modified_gmt] => 2017-06-07 15:29:09
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=30433
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[26] => WP_Post Object
(
[ID] => 30217
[post_author] => 111
[post_date] => 2017-03-28 13:50:24
[post_date_gmt] => 2017-03-28 12:50:24
[post_content] => In the last few months, there has been a flurry of articles about the Initial Public Offering (IPO) of Saudi Aramco. While such articles offer a fresh perspective on the complexities involved in the IPO of Saudi Aramco, key issues are still missing in the debate. This short paper tries to fill some of these gaps. First, it emphasizes that the IPO can’t be isolated from the range of recent reforms and adjustments taking place in Saudi Arabia and the pace of these reforms will be key in determining the valuation of Saudi Aramco. At the same time, the IPO will determine the pace and success of these reforms. So a bet on Saudi Aramco is a bet on how successfully one thinks that Saudi Arabia, in an era of lower oil prices will adjust its economy and diversify its economic base. Second, it raises the question as to the main underlying motivation behind the IPO. The answer to that question is often taken for granted: an effort ‘to wean the kingdom off oil through Vision 2030 which aims to diversify the Saudi economy and create jobs’. But the IPO is mainly about income diversification and boosting the resources of the Public Investment Fund. This is fundamentally different from ‘real’ economic diversification, which is often associated with expanding the economic base and job creation. As the experience of neighboring countries has shown, sovereign wealth funds predominantly diversify their assets by investing in foreign markets rather than in diversification of the domestic economy into employment creating sectors. Finally, this comment attempts to clarify some confusion regarding the IPO, particularly in relation to the ownership of the reserve base with some arguing that ‘there are reasons to be cautious about expecting much more transparency’ because ‘it is far from clear that any share sale would include ownership of the reserves in the ground’. As argued in this paper, the issue of ownership of reserves is not that relevant as Saudi Aramco, in which investors will have an ownership stake, has and will continue to have an exclusive concession to exploit the underground reserves including the right to monetize any potential growth in these reserves.
[post_title] => The IPO of Saudi Aramco: Some Fundamental Questions
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => ipo-saudi-aramco-fundamental-questions
[to_ping] =>
[pinged] =>
[post_modified] => 2017-03-30 16:34:44
[post_modified_gmt] => 2017-03-30 15:34:44
[post_content_filtered] =>
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=30217
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[27] => WP_Post Object
(
[ID] => 30048
[post_author] => 111
[post_date] => 2017-01-25 10:57:56
[post_date_gmt] => 2017-01-25 10:57:56
[post_content] => This presentation, delivered at Chatham House, looks at the dynamics of investment in the Middle East’s oil and gas upstream sector following the recent fall in oil price. In contrast to most regions in the world that saw sharp cuts in capital expenditure, investment in the upstream oil and gas sector in the Middle East declined only marginally in nominal terms. Given the cost deflation in the supply chain this meant that activity was maintained and even increased in some countries as reflected in the sharp rise in the rig count, with key GCC producers still on track to achieve their ambitious plans to increase productive capacity (though delays to some projects are possible). But this is a tale of two regions: While GCC producers continue to invest and increase their productive capacity, Iraq has suffered from cuts in investment especially in much needed large infrastructure, adversely impacting oil output growth and plans to increase long-term productive capacity. In Iran, progress has been slow and despite the flurry of deals announced, these are still very preliminary and without foreign investment and technology, Iran’s upside potential from current production levels is rather limited. It is argued that IOCs’ strategies in the Middle East differ fundamentally, with few IOCs regarding chasing low cost Middle East barrels, and increasing their exposure to the region’s large reserve base, as a cornerstone of their strategy in a more uncertain world. The opening of Iran will offer opportunities for IOCs to increase their exposure to a large reserve base, but given the risks involved, such opportunities will be captured by only a few companies that have the patience and capability to manage these risks. The presentation concludes by arguing that during this downturn, the core GCC OPEC producers (Saudi Arabia, Kuwait, and the UAE) consolidated their position by continuing to invest in their upstream sector reflecting their long-term thinking and hence benefiting the most from an upturn in the market; the rest of OPEC and most of the non-OPEC producers will have to play catch up.
[post_title] => Upstream Investment in the Middle East: Challenges and Opportunities in a Lower Price Environment
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => upstream-investment-middle-east-challenges
[to_ping] =>
[pinged] =>
[post_modified] => 2017-01-25 10:57:56
[post_modified_gmt] => 2017-01-25 10:57:56
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[28] => WP_Post Object
(
[ID] => 30041
[post_author] => 111
[post_date] => 2017-01-24 10:25:18
[post_date_gmt] => 2017-01-24 10:25:18
[post_content] =>

This paper explores how the oil price path could evolve in 2017 by assessing the various oil price risks under alternative forecast scenarios pertaining to future market conditions. It is shown that even without the OPEC-non-OPEC output cut agreement in November 2016, the three-year long price fall would eventually have come to a halt and stabilized at close to $41/b in 2017 based solely on market forces. The agreement, however, helped accelerate the price recovery by stabilising the oil price near $50/b. That said, the current price at above $50/b already incorporates the bulk of the expected gains from the full enforcement of the production cuts and reflects the positive shift of market sentiment that has been building-up in anticipation of the implementation of the output cut agreement. Thus, for the next year, the oil price path is more sensitive to downside risks depending on the discipline of OPEC and non-OPEC oil producers. In fact, for the price recovery to be sustained in 2017, OPEC efforts must be met by favourable market conditions in the form of an unexpected surge in global oil demand amid a moderate expansion of US shale supply. On the contrary, a deterioration of global economic activity, or an aggressive expansion of US shale supply, or both, could reverse the current momentum. Moreover, a return of oil production from conflict inflicted countries Libya and Nigeria could undermine the OPEC agreement from within. Eventually, whatever scenario plays out, OPEC will continue to assess the market conditions and in the second half of 2017, it can decide on whether to extend the agreement to offset any losses to the anticipated oil price recovery that may arise from changes in oil market conditions or to drop the agreement all together. But regardless which way the decision goes, the latest output cut agreement is critical to resolving fundamental uncertainties about the shock hitting the oil market and OPEC behaviour in a more uncertain world.

[post_title] => Oil Price Paths in 2017: Is a Sustained Recovery of the Oil Price Looming?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => oil-price-paths-2017-sustained-recovery-oil-price-looming
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[pinged] =>
[post_modified] => 2017-01-24 10:25:18
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[29] => WP_Post Object
(
[ID] => 30026
[post_author] => 111
[post_date] => 2017-01-17 13:48:02
[post_date_gmt] => 2017-01-17 13:48:02
[post_content] => This presentation delivered at the Department of Business, Energy & Industrial Strategy (BEIS) analyses the main factors shaping Saudi oil policy and the various phases of the Kingdom’s oil policy since the 2008 financial crisis. It is possible to identify four such phases: 1) In the aftermath of the 2008 financial crisis, Saudi Arabia decided to cut output in the face of a temporary demand shock sending a strong signal about its preferred price of $75/barrel; 2) In the face of supply disruptions following the Arab Spring and the sanctions on Iran in 2011—12, Saudi Arabia increased its output to fill the supply gap and adjusted its preferred price upwards to $100/barrel; 3) Towards the end of 2014, in the face of the large supply-demand imbalance caused by a prolonged period of high and stable oil prices, non-cooperation from other producers, and structural uncertainties hitting the oil market, Saudi Arabia opted not to cut output and instead boosted its production in an attempt to maintain market share; 4) In 2016, Saudi Arabia signaled a change in stance and took the leading role in engineering a cut within OPEC and with non-OPEC. This presentation examines the main factors that could explain the recent change in Saudi Arabia’s behavior; analyses the costs and uncertainties associated with maintaining market share strategy; and explores some of the potential scenarios that could play out in 2017. As argued elsewhere, Saudi oil policy is shaped by multiple factors and as these factors change and/or as new information becomes available, Saudi Arabia’s oil policy will also change. It is also argued that, as in 2016, OPEC behavior will be the key factor shaping oil market dynamics in 2017.
[post_title] => The Phases of Saudi Oil Policy: What Next?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => phases-saudi-oil-policy-next
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[pinged] =>
[post_modified] => 2017-01-17 13:48:02
[post_modified_gmt] => 2017-01-17 13:48:02
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[30] => WP_Post Object
(
[ID] => 29761
[post_author] => 111
[post_date] => 2016-10-28 11:11:50
[post_date_gmt] => 2016-10-28 10:11:50
[post_content] => This comment argues that while Saudi Arabia has shown willingness to cooperate, this does not imply that the fundamentals of Saudi oil policy have necessarily changed nor that the kingdom would accept any deal irrespective of the key principles that have been guiding Saudi oil policy so far. Based on its historical record, it is possible to identify four such fundamental principles, which need to be upheld for the success of the negotiations in the OPEC November meeting:

Saudi Arabia will not act unilaterally and any agreement should be part of a collective effort within OPEC and with other key non-OPEC producers;

There is a certain production level that Saudi Arabia is not willing to go below;

Any potential deal should be politically acceptable to the Saudi leadership;

Most importantly, the deal should have a real impact on the oil price and result in higher revenues for the kingdom.

On each of these counts, the challenges facing Saudi Arabia are immense and the probability that these barriers will be overcome by November remains low. However, there is a realization within OPEC that failure to reach any sort of agreement in November will be very bearish for the oil market with the potential to erase all recent price gains. This would continue to put pressure on OPEC to try to reach some sort of agreement, though such a potential deal may not be as neat as many in the market are expecting and OPEC may just decide to postpone some of the difficult decisions on individual quotas to a later date and agree on a collective cut in the hope that the market will be as forgiving as after the Algiers meeting, which is highly unlikely. Should there be no clear agreement on cutting output and how to allocate individual quotas, Saudi signaling about cooperation will most likely continue, as it has no interest in talking prices down. But in terms of actual volumes it may be a different story altogether, with the possibility of output being maintained at high levels, or even increased until a collective agreement is reached, delaying the rebalancing process. This is a risk that both producers and the market should not ignore.
[post_title] => OPEC Deal or No Deal? This is Not the Question
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => opec-deal-no-deal-not-question
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[pinged] =>
[post_modified] => 2016-10-28 11:11:50
[post_modified_gmt] => 2016-10-28 10:11:50
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=29761
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[31] => WP_Post Object
(
[ID] => 29712
[post_author] => 111
[post_date] => 2016-10-13 12:51:13
[post_date_gmt] => 2016-10-13 11:51:13
[post_content] => In 2015, oil demand growth, which surprised on the upside, was responsible for most of the adjustment in the oil market imbalance. In 2016, oil demand growth started slowing down and the baton of adjustment passed to non-OPEC supply, particularly US shale, which has declined sharply in recent months. So far, the OPEC cut feedback mechanism has been absent in this current downturn, and instead, Middle East-OPEC (led by Iraq and Saudi Arabia and joined recently by Iran) has been a major contributor to oil supply growth. This OPEC behaviour is fundamentally different from some of the previous cycles. This presentation given at the Bank of England analyses the various OPEC adjustment mechanisms in this low oil price environment; agreement on cuts, the investment-output mechanism, and the fiscal crisis-disruption mechanism. It is argued that these adjustment mechanisms are highly uncertain and the adjustment lags are different from those for high cost producers and US shale, hence their impacts on the oil market are very difficult to predict. The presentation also analyses the three phases of Saudi oil policy since the 2010 oil market recovery and questions whether there is a new phase in the making. The presentation concludes that Saudi oil policy is being shaped by multiple considerations; internal factors (limited diversification and high reliance on oil revenues); external factors (the nature of the shock hitting the oil market); and OPEC dynamics (the ability to reach and implement an agreement with other producers especially at times when many producers are seeking to increase their productive capacity). As these factors change and/or as new information about the shock becomes available, Saudi oil policy will also adapt. Potential shifts in Saudi oil policy and/or signals about these shifts will continue to shape oil market outcomes.
[post_title] => The Low-Cost OPEC Cycle: The Big Elephant in the Room
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => low-cost-opec-cycle-big-elephant-room
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[pinged] =>
[post_modified] => 2016-10-13 12:51:13
[post_modified_gmt] => 2016-10-13 11:51:13
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=29712
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[32] => WP_Post Object
(
[ID] => 29685
[post_author] => 111
[post_date] => 2016-10-03 13:24:47
[post_date_gmt] => 2016-10-03 12:24:47
[post_content] =>

As much of the world pushes ahead with the deployment of renewable energy, resource-rich MENA economies are lagging behind. For the region to catch up, new policies are required to remove barriers of entry to the industry and create investment incentives. This paper contends that while the main obstacles to deployment of renewables are grid infrastructure inadequacy, insufficient institutional capacity, and risks and uncertainties, the investment incentives lie on a policy instrument spectrum with two polar solutions: (i) the incentive is provided entirely through the market (removing all forms of fossil fuel subsidies and internalising the cost of externalities); or (ii) the incentive is provided through a full government subsidy programme (in addition to the existing fossil fuel subsidies). However, there is a trade-off between the two dimensions of the fiscal burden and political acceptance across the policy instrument spectrum, which implies that the two polar solutions themselves are not easily and fully implementable in these countries. Therefore, we propose a combinatorial approach in which the incentive for renewables deployment is provided through a partial renewable subsidy program and partial fossil fuel price reform in a way that balances the fiscal pressure on the government against political acceptability. Additionally, the paper argues that the fact resource-rich countries are behind advanced economies in electricity sector reform gives them a last-mover advantage in the sense that they can tap into years of international experience to avoid design mistakes and create a sustainable solution that is compatible with renewables deployment and their own context.

[post_title] => Advancing Renewable Energy in Resource-Rich Economies of the MENA
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => advancing-renewable-energy-resource-rich-economies-mena
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-16 13:39:10
[post_modified_gmt] => 2017-11-16 13:39:10
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=29685
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[33] => WP_Post Object
(
[ID] => 29395
[post_author] => 111
[post_date] => 2016-07-19 09:34:38
[post_date_gmt] => 2016-07-19 08:34:38
[post_content] => Structural reforms outlined in Vision 2030 are much needed to shift the economy to a more sustainable path and even if only a small part of Vision 2030 is being implemented, the Saudi economy will look very different in 2030 than it does now. The key question is whether these changes will have a substantial impact on oil policy and the evolution of the energy sector. In this comment, we argue that while the recent announcements and organisational changes are substantial, and the overall objectives of Vision 2030 are very ambitious, the impact on oil policy and the energy sector is likely to be more subtle than current expectations. Despite expectations of a diminished role, the Saudi energy sector (and particularly the oil and gas sector) remains key to a smooth transition to the vibrant economy envisioned and will continue to play a vital role in the country’s future. Furthermore, the overall direction of Saudi oil policy in terms of its production and investment policy, maintaining spare capacity, integrating down the value chain through investing in refining and petrochemicals, increasing the role of gas in the energy mix, introducing efficiency measures and deploying renewables in the power mix to free crude oil for exports are not likely to change in the next few years as has been confirmed by the National Transformation Programme. In fact, one could argue that the Saudi energy sector would benefit from a more integrated energy policy that takes a holistic view about the energy challenges facing the kingdom. But the Saudi energy sector will not be immune from the changes in other parts of the economy as the recent restructuring of the energy ministry, the recent increase in energy price, the emphasis on local content policies, and plans for a partial public listing of Saudi Aramco have shown. The restructuring and reorganisation of such a vital sector and the acceleration of some policies may bring benefits and achieve efficiency gains, but they will also generate uncertainties and risks, which need to be carefully assessed and managed so policymakers don’t end up killing the goose that lays the golden eggs.
[post_title] => Saudi Arabia’s Vision 2030, Oil Policy and the Evolution of the Energy Sector
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => saudi-arabias-vision-2030-oil-policy-evolution-energy-sector
[to_ping] =>
[pinged] =>
[post_modified] => 2016-07-19 09:34:38
[post_modified_gmt] => 2016-07-19 08:34:38
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[34] => WP_Post Object
(
[ID] => 29309
[post_author] => 111
[post_date] => 2016-05-31 15:48:40
[post_date_gmt] => 2016-05-31 14:48:40
[post_content] => The sharp fall in the oil price has divided views about the nature of the latest oil price cycle. Some argue that the oil market has been subject to structural shocks that have created a ‘new global oil order’ and that we have entered a world of ‘low oil prices for much longer’. Others are of the view that oil prices will rise sooner than currently expected and the current price fall has many of the characteristics of previous cycles. These two views reflect the high degree of uncertainty engulfing the oil market. This raises some key questions: Has there been a structural shift in the oil market adjustment mechanisms? Is the cycle different this time? And if different, how? This short comment tries to tackle these questions by analysing the nature of the adjustment mechanisms both on the supply (non-OPEC outside the US shale, US shale and OPEC) and on the demand side and by examining the internal consistency of ‘the lower oil price for longer’ scenario and the cyclical view of oil prices.
[post_title] => Adjustment in the Oil Market: Structural, Cyclical or Both?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => adjustment-oil-market-structural-cyclical
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[pinged] =>
[post_modified] => 2016-05-31 15:48:40
[post_modified_gmt] => 2016-05-31 14:48:40
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=29309
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[35] => WP_Post Object
(
[ID] => 29272
[post_author] => 111
[post_date] => 2016-04-29 11:56:33
[post_date_gmt] => 2016-04-29 10:56:33
[post_content] => In 2015, the Gulf Cooperation Council (GCC) countries began implementing and accelerating pricing reforms targeting the removal of energy subsidies. While the price increases were from a low base and domestic energy prices are still well below international levels and among the cheapest in the Middle East and North Africa (MENA) region, the recent increases represent a fundamental shift in the GCC’s economic and social policies. In this Comment we analyse the fiscal pressures which led to the acceleration of pricing reforms, which we argue were building even during the period of record high oil prices preceding it; we review recent energy pricing reforms in GCC countries; and we analyse the implications of these reforms for the social contract between GCC governments and their citizens. We conclude that recent energy pricing reforms have been driven primarily by short-term revenue needs, and, while the implicit social contract is not as rigid as originally perceived, it may not prove sufficiently elastic to accommodate further price increases. Deeper reforms will therefore not be viable unless governments introduce mitigation measures and implement effective communication strategies which emphasize the importance of energy pricing reform for national transformation.
[post_title] => Striking the Right Balance? GCC Energy Reforms in a Low Price Environment
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => striking-right-balance-gcc-energy-reforms-low-price-environment
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[pinged] =>
[post_modified] => 2016-06-29 13:31:34
[post_modified_gmt] => 2016-06-29 12:31:34
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=29272
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[36] => WP_Post Object
(
[ID] => 29087
[post_author] => 1
[post_date] => 2016-02-24 09:11:50
[post_date_gmt] => 2016-02-24 09:11:50
[post_content] => The accord reached by Saudi Arabia and Russia, along with Qatar and Venezuela, in Doha on February 16th has been widely seen as effectively an agreement to do nothing. The four countries have accepted a freeze in production based on January 2016 levels, but for most of them (with the exception of Saudi Arabia) this effectively means the ability to maintain oil output at or near full capacity. The impact on the oil market balance will be minimal, especially in the short term. Furthermore, significant caveats were included in the Doha agreement, in particular that it would only take effect if other OPEC and non-OPEC countries agree to co-operate. Saudi oil minister Al-Naimi also added that his country would ‘continue to satisfy customer demand’ for oil. Indeed, the reaction of the oil market, which saw prices rise by more than 10% in anticipation of the meeting but then fall back by over half that amount after its conclusion, underlined the ostensibly disappointing outcome. However, despite the minimal impact of the deal on market balances, the reaching of an accord between the largest OPEC and non-OPEC producers does suggest some interesting conclusions for the oil market over the next few months, as subtle shifts in negotiating tactics have started to emerge.
[post_title] => Saudi-Russia Production Accord - The Freeze Before the Thaw?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => saudi-russia-production-accord-the-freeze-before-the-thaw
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 16:23:03
[post_modified_gmt] => 2016-02-29 16:23:03
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[guid] => https://www.oxfordenergy.org/?post_type=publications&p=29087
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[37] => WP_Post Object
(
[ID] => 29078
[post_author] => 1
[post_date] => 2016-02-08 14:09:12
[post_date_gmt] => 2016-02-08 14:09:12
[post_content] => On Wednesday January 27th Russian Energy Minister Alexander Novak met with a group of Russian oil companies to discuss the domestic and global energy markets, following which he announced that Russia would be prepared to discuss an output cut of 3-5% at a meeting with OPEC in February. On the face of it this would seem to imply that Russia might reduce production by 300,000-500,000 b/d, and indeed the immediate reaction of the oil market suggested that some credibility had been given to the statement as the oil price surged by 8% in the immediate aftermath of the comments. However, subsequent comments by other Russian and OPEC observers, combined with the history of Russia’s relationship with OPEC, which has achieved little of substance, suggests that an agreement is a long way from being concluded and has limited chances of success. A more interesting conclusion is that Russia, perhaps not surprisingly, has revealed its growing economic and corporate desperation to see oil prices rise.
[post_title] => Russia and OPEC - Uneasy Partners
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => russia-and-opec-uneasy-partners
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 16:22:34
[post_modified_gmt] => 2016-02-29 16:22:34
[post_content_filtered] =>
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[guid] => https://www.oxfordenergy.org/wpcms/?post_type=publications&p=29078
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[38] => WP_Post Object
(
[ID] => 27320
[post_author] => 1
[post_date] => 2015-10-19 15:22:05
[post_date_gmt] => 2015-10-19 14:22:05
[post_content] => This paper follows on from ‘Saudi Arabia’s Oil Policy: More than Meets the Eye?’ published in June 2015, which raised a set of fundamental questions in relation to the sharp drop in the oil price between June 2014 and January 2015, and OPEC’s decision, spearheaded by Saudi Arabia, not to cut output in response. We develop a simple analytical framework, which formalizes Saudi Arabia’s decision-making process relative to the fundamental revenue maximization-market share trade-off in the 2014-15 oil price fall. Using a simple game, we show that under uncertainty, it is always better off for the Kingdom to assume shale oil supply is elastic and not to cut output. But we also argue that as Saudi Arabia learns more about this new source of supply, its policy will adapt accordingly. The fact Saudi Arabia’s oil policy could change as the trade-off between revenue maximization and market share evolves, and as new information is transmitted to the market, will keep the market second-guessing. It will continue to shape market expectations and influence market outcomes.
Executive Summary
[post_title] => The Dynamics of the Revenue Maximisation--Market Share Trade-off - Saudi Arabia's Oil Policy in the 2014--2015 Price Fall
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-dynamics-of-the-revenue-maximisation-market-share-trade-off-saudi-arabias-oil-policy-in-the-2014-2015-price-fall
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-20 09:37:12
[post_modified_gmt] => 2017-11-20 09:37:12
[post_content_filtered] =>
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[guid] => https://www.oxfordenergy.org/wpcms/publications/the-dynamics-of-the-revenue-maximisation-market-share-trade-off-saudi-arabias-oil-policy-in-the-2014-2015-price-fall/
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[39] => WP_Post Object
(
[ID] => 27329
[post_author] => 1
[post_date] => 2015-07-17 10:54:49
[post_date_gmt] => 2015-07-17 09:54:49
[post_content] => In this presentation, given at the Bank of England, Bassam Fattouh looks at current developments in the oil market and explores some short and medium term prospects and concludes with the following observations:
• It is important to be clear about causality; it is supply and demand imbalances that cause stocks to rise and for the shape of the curve to switch to contango.
• High levels of stocks will continue to put downward pressure on the oil price and on time spreads. Until stocks are drawn-down, any potential price recovery will be capped.
• Most pressure will be felt on light sweet crudes and on the Brent structure given that the North Atlantic (ex-US) has become the clearing destination for light sweet cargoes.
• Saudi oil policy is not constant and Saudi cuts should not be excluded but the bar to implement the cut has risen. Saudi Arabia output policy has become less flexible both on the upside and the downside and its signaling power has reduced.
• The perception of the loss of supply feedback to clear markets affects market sentiment, increasing volatility and increasing the risk premium in investment in energy projects.
• Clearing excess supplies through supply and demand adjustment to lower prices is subject to uncertainty and lags.
• So far demand growth has done most of the work, though it has not been strong enough to absorb the entire glut.
• The supply response is yet to come, but global supply has become more varied and the nature of the investment cycle has changed - there are three investment cycles being superimposed on each other: The US shale cycle; the non-OPEC ex- US cycle; and the OPEC/Middle East cycle. The outcome of these combined investment cycles on output is yet to be seen.
• A key question remains: If non-OPEC outside the US falters and OPEC investment does not materialise, can US shale fill the projected gap?
[post_title] => Global Oil Markets - Current Developments and Future Prospects
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => global-oil-markets-current-developments-and-future-prospects
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 16:19:25
[post_modified_gmt] => 2016-02-29 16:19:25
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/global-oil-markets-current-developments-and-future-prospects/
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[post_type] => publications
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[40] => WP_Post Object
(
[ID] => 27336
[post_author] => 1
[post_date] => 2015-06-19 10:47:44
[post_date_gmt] => 2015-06-19 09:47:44
[post_content] => The sharp drop in the oil price between June 2014 and January 2015 turned the world’s attention to Saudi Arabia’s role in the oil market and the determinants of its oil output policy. Initial hopes that Saudi Arabia would come to ‘rescue’ and ‘balance’ the market and put a floor under the oil price were replaced by stories of ‘price wars’ and ‘conspiracy theories’ aimed at pushing prices down to achieve some wider geopolitical objectives. This raised a set of fundamental questions: has there been a shift in Saudi Arabia’s oil policy? And if the answer is yes, what are the implications of this shift in policy on the short and long run dynamics of the oil market? Has the role of ‘swing producer’ shifted from Saudi Arabia to the US shale producers? Is Saudi Arabia still relevant in the ‘new oil order’? This paper argues Saudi Arabia’s oil policy should not be analysed in isolation of the evolution of global oil market dynamics. It is also fundamentally rooted and shaped by some salient features of its political, economic, and social systems. Given Saudi Arabia’s multiple objectives, some of which are short term while others are long term, and also given the limited number of tools available to policy makers (essentially: adjusting output and signalling to the market in the short term, and determining the pace of investment in its energy sector in the long term), Saudi Arabia faces trade-offs with regards to its oil output decisions. One key trade-off is between the objective of revenue maximization vis-à-vis that of maintaining market share and production volumes above a certain level. With the advent of US shale, Saudi Arabia has entered uncharted territory where it is still learning about a new source of supply and its responsiveness to price signals, which has made the calculus of the trade-off more uncertain. It is in the context of ‘second best’, trade-offs, imperfect information, internal constraints, and wide uncertainty introduced by a new source of supply, that this paper attempts to explain the behaviour of Saudi Arabia in the current price cycle.
Executive Summary
[post_title] => Saudi Arabia Oil Policy - More than Meets the Eye?
[post_excerpt] =>
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[post_name] => saudi-arabia-oil-policy-more-than-meets-the-eye
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[post_modified] => 2017-11-20 09:45:09
[post_modified_gmt] => 2017-11-20 09:45:09
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[guid] => https://www.oxfordenergy.org/wpcms/publications/saudi-arabia-oil-policy-more-than-meets-the-eye/
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[41] => WP_Post Object
(
[ID] => 27343
[post_author] => 1
[post_date] => 2015-04-30 12:04:04
[post_date_gmt] => 2015-04-30 11:04:04
[post_content] => This short comment discusses how oil policy in the Arab world is often perceived by some parts of the western media, focusing on media coverage over the latest oil price cycle. An abridged version of this comment was presented at the 2nd GCC Petroleum Media Forum (Riyadh, Saudi Arabia, 22-24 March 2015).
[post_title] => The Image of GCC Oil Policy in the Western Media
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-image-of-gcc-oil-policy-in-the-western-media
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 16:07:19
[post_modified_gmt] => 2016-02-29 16:07:19
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-image-of-gcc-oil-policy-in-the-western-media/
[menu_order] => 0
[post_type] => publications
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[42] => WP_Post Object
(
[ID] => 27359
[post_author] => 1
[post_date] => 2015-03-18 13:55:32
[post_date_gmt] => 2015-03-18 13:55:32
[post_content] =>

This presentation outlines the current uncertainties engulfing the oil market focusing on two key dynamics: Saudi Arabia oil policies and the new dynamics unleashed by US shale production. It is argued that Saudi oil policy is rooted in fundamental features of Saudi Arabia’s political, economic and social systems. These include:

• High dependency on oil revenues
• Massive oil and gas reserve base which will be exhausted over many decades
• Its dominance in oil markets and oil trade
• The availability of idle (spare) capacity
• Leadership among oil-exporting countries
• The challenge of long-run economic development
• The vital importance of achieving political and internal stability

It is argued that maximizing revenue remains a key objective for Saudi Arabia but that this should be balanced against the objective of maintaining volumes above a certain level and avoiding loss of market share. The trade-off will be shaped by market conditions, cohesiveness of OPEC, and internal conditions of the country, which will determine the direction that policy will take. Therefore, Saudi Arabia oil policy is not constant and there is no desired ‘oil price’ (price is a moving target depending on market conditions). US Shale has generated a new set of challenges and uncertainties making the calculus of the trade-off more difficult and uncertain.

[post_title] => Oil Market Dynamics - Saudi Arabia Oil Policies and US Shale Supply Response
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[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => oil-market-dynamics-saudi-arabia-oil-policies-and-us-shale-supply-response
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 16:06:12
[post_modified_gmt] => 2016-02-29 16:06:12
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/oil-market-dynamics-saudi-arabia-oil-policies-and-us-shale-supply-response/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[43] => WP_Post Object
(
[ID] => 27364
[post_author] => 1
[post_date] => 2015-02-24 15:47:27
[post_date_gmt] => 2015-02-24 15:47:27
[post_content] => Energy subsidies are among the most pervasive, and most controversial fiscal policy tools in the Middle East and North Africa (MENA). In a region with few functioning social welfare systems, subsidized energy prices continue to form an important social safety net, albeit a highly costly and inefficient one. In the MENA region’s oil and gas producers, low energy prices have also historically formed an important element of an unwritten social contract, where governments extracted their countries’ hydrocarbon riches in return for citizens’ participation in sharing resource rents. While it is clear that energy subsidy reform will not be the only variable at play, its potential socio-economic dividends are important factors enabling some common regional objectives – sustainable fiscal policy, fiscal space to invest in key areas, and a more efficient and equitable distribution of scarce resources – to be achieved, helping to promote a more stable political status quo in the long term. If accommodated by effective mitigation measures, reforming energy subsidies in the MENA region’s middle-income economies could be a powerful tool for governments – addressing those very profound socio-economic grievances that have contributed to the outbreak of political protest. In this paper, we look at some of the MENA region’s potential avenues into reform. While the past has demonstrated the political difficulty of reforming energy prices, recent experience also shows that the reform of energy subsidies can be done, if accompanied by a set of enabling factors.
[post_title] => A Brief Political Economy of Energy Subsidies in the Middle East and North Africa
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => a-brief-political-economy-of-energy-subsidies-in-the-middle-east-and-north-africa
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-20 10:43:23
[post_modified_gmt] => 2017-11-20 10:43:23
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/a-brief-political-economy-of-energy-subsidies-in-the-middle-east-and-north-africa/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
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[filter] => raw
)
[44] => WP_Post Object
(
[ID] => 27365
[post_author] => 1
[post_date] => 2015-02-18 11:52:44
[post_date_gmt] => 2015-02-18 11:52:44
[post_content] => In this report published by the German Marshall Fund of the United States, Bassam Fattouh and Laura El-Katiri examines the prospects of Lebanon turning into a natural producer and exporter. Lebanon’s exclusive economic zone forms part of the Levant Basin, which has been estimated to hold up to 122 trillion cubic feet of recoverable natural gas, in addition to some 1.7 billion barrels of recoverable oil. The development of its hydrocarbon reserves would enable Lebanon to reduce its dependence on imports of oil products, which in 2012 constituted more than 97 percent of its total primary energy supplies. The government is keen to diversify Lebanon’s energy mix away from oil to strengthen its security of supply and to reduce air pollution. But gas production is not likely to begin before the mid-2020s. Until then, Lebanon would need to import all its gas requirements in order to increase the share of natural gas in the energy mix. The commercial development of Lebanon’s hydrocarbon reserves faces many internal and external challenges. Lebanon’s hydrocarbon sector and its institutional and regulatory framework are still in their infancy. Deadlock in Lebanon’s sectarian political system has led to long delays in the country’s hydrocarbon development and produced a volatile regulatory environment. The country suffers from weak administration, widespread corruption, and a poor business climate. As yet, Lebanon has no proven gas reserves, and until 2005 it did not have any gas infrastructure at all. The international community has a strong interest in ensuring that Lebanon’s potential hydrocarbon wealth brings benefits to the country and the region and does not become an additional source of tension.View the report.
[post_title] => Lebanon - The Next Eastern Mediterranean Gas Producer?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => lebanon-the-next-eastern-mediterranean-gas-producer
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 13:50:13
[post_modified_gmt] => 2016-03-01 13:50:13
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/lebanon-the-next-eastern-mediterranean-gas-producer/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
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)
[45] => WP_Post Object
(
[ID] => 27374
[post_author] => 1
[post_date] => 2015-01-26 14:15:39
[post_date_gmt] => 2015-01-26 14:15:39
[post_content] => Recent changes in international oil prices have highlighted the issue of petroleum product pricing reforms in a number of non-OECD economies, particularly as the non-OECD now accounts for the bulk of the global growth in consumption of petroleum products. In 2014, oil demand from the non-OECD is predicted to overtake OECD oil demand for the very first time. Of this, four economies – Brazil, Russia, India, and China, the ‘BRIC’ countries – will account for 45 per cent of non-OECD oil demand. The BRIC countries have some common socioeconomic and demographic characteristics, and face similar challenges in domestic energy policy. One significant common policy stance has been associated with petroleum product pricing – specifically, the historical use of price controls, together with efforts to reform these over time. The most interesting feature of this shared policy stance is that it has led to different outcomes in the BRIC economies, particularly in relation to the impacts on downstream investment.
This paper investigates the impacts of gasoline and diesel pricing reforms on downstream investment in the BRICs. Of the BRICs, India and China (the two countries that are the largest net importers of oil) have accounted for the largest downstream investments and expansions in refining capacity. However, these are also the two BRICs where price controls for petroleum products have been largely retained by governments, which have preferred a gradual approach towards the liberalization of prices. In contrast, Brazil and Russia, where petroleum product prices were officially liberalized in the early 1990s and early 2000s, have experienced serious constraints in attracting downstream investments and have struggled to expand (in the case of Brazil) or upgrade (in the case of Russia) their refining capacity. These outcomes run counterintuitive to expectation, according to which liberalization and the alignment of domestic petroleum product prices with international oil prices should be conducive to fostering competition and investment along the entire value chain.
In investigating the reasons for this counterintuitive outcome, an analysis of the ‘pass-through’ of international price movements to domestic prices for gasoline and diesel shows broad evidence of price controls being exercised in Brazil and Russia despite the official liberalization of prices, through implicit or indirect measures, with governments typically influencing domestic pricing through intervention in the operations and capital expenditure plans of the National Oil Companies (NOCs). In contrast, India and China have used explicit or direct measures such as setting prices directly, adjusting federal taxes, and compensating NOCs and marketing/retailing companies, as well as specific consumer groups affected by price changes directly using cash transfers. The findings therefore demonstrate a dichotomy of experience amongst the BRICs. This paper sets out three broad policy lessons – first, that the impacts of price controls generally tend to be concentrated in one part of the value chain, and although governments may view this as ‘manageable’ or ‘containable’ - these impacts have knock-on effects, as shown in this paper. Second, that petroleum product price liberalization is not irreversible – demonstrated by the experiences of Brazil and Russia where price controls were reintroduced implicitly. And third, that there is a need, post-liberalization, for policies and price adjustment mechanisms which are logical and transparent, and which take into account the potentially negative impacts of price controls on downstream capital expenditure.
Executive Summary
[post_title] => Gasoline and Diesel Pricing Reforms in BRIC Countries - A Comparison of Policy and Outcomes
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => gasoline-and-diesel-pricing-reforms-in-bric-countries-a-comparison-of-policy-and-outcomes
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-20 10:46:37
[post_modified_gmt] => 2017-11-20 10:46:37
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/gasoline-and-diesel-pricing-reforms-in-bric-countries-a-comparison-of-policy-and-outcomes/
[menu_order] => 0
[post_type] => publications
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[46] => WP_Post Object
(
[ID] => 27382
[post_author] => 1
[post_date] => 2015-01-09 11:25:46
[post_date_gmt] => 2015-01-09 11:25:46
[post_content] => The Arab Energy Club organised a special session in Bahrain to celebrate and honour the work of Robert Mabro, the founder and former Director of the Oxford Institute for Energy Studies, and to look back at his lifetime contribution to the analysis of oil markets and his efforts to bring together the various stakeholders in the producing and consuming countries to the benefit of all.
This presentation reflects on Robert Mabro’s work, drawing on some of his deep insights for a better understanding of current oil market dynamics and the role of OPEC in shaping oil market outcomes.
[post_title] => Current Oil Market Dynamics and the Role of OPEC - Reflections on Robert Mabro's Work
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => current-oil-market-dynamics-and-the-role-of-opec-reflections-on-robert-mabros-work
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 16:04:16
[post_modified_gmt] => 2016-02-29 16:04:16
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/current-oil-market-dynamics-and-the-role-of-opec-reflections-on-robert-mabros-work/
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[post_type] => publications
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)
[47] => WP_Post Object
(
[ID] => 27390
[post_author] => 1
[post_date] => 2014-10-22 10:35:50
[post_date_gmt] => 2014-10-22 09:35:50
[post_content] => The sharp fall in oil prices in the last few weeks has turned the world’s attention to OPEC and particularly to Saudi Arabia’s response to the current slide in the oil price. Following unofficial communications to the market that Saudi Arabia is comfortable with markedly lower oil prices, even for an extended period, hopes that the Kingdom would come to the rescue and ‘balance’ the market, arresting the decline in the oil price, were replaced by stories of ‘price wars’, ‘conspiracy theories’ and ‘grand design strategies and games’. But why Saudi Arabia has not reacted to the fall in the oil price ‘in the expected manner’ is a question to which there is no clear single answer, especially given that all the explanations put forward suffer from some form of internal inconsistency. This presentation explores some of the potential explanations and the implications on oil price dynamics.
[post_title] => Saudi Arabia's Oil Policy in Uncertain Times - A Shift in Paradigm?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => saudi-arabias-oil-policy-in-uncertain-times-a-shift-in-paradigm
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 16:00:32
[post_modified_gmt] => 2016-02-29 16:00:32
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/saudi-arabias-oil-policy-in-uncertain-times-a-shift-in-paradigm/
[menu_order] => 0
[post_type] => publications
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)
[48] => WP_Post Object
(
[ID] => 27393
[post_author] => 1
[post_date] => 2014-10-13 13:33:31
[post_date_gmt] => 2014-10-13 12:33:31
[post_content] => While the impact of the increase in US production on prices and on oil market dynamics is yet to be fully felt, as some of the underlying forces still need time to unfold and need to be fully understood, it is important to provide a general framework to help us analyse the US shale revolution and its potential impacts on oil markets and key Middle East producers. In this paper, we propose a broad framework based on three main aspects: the US tight oil revolution as a positive oil supply shock – with the potential to transform into a global supply shock if hydraulic fracturing technology successfully diffuses to other parts of the world; the US tight oil revolution as a force disrupting the existing trade flow patterns of crude oil, petroleum products, condensates, and NGLs; the development of US shale as a powerful force behind the shift in market perceptions, not only from a position of oil scarcity to one of oil abundance, but also as a shift in terms of the USA’s aspiration to achieve energy independence and how this would impact US foreign policy and its relations with other players, including key Middle East oil exporters.
Executive Summary
[post_title] => The US Tight Oil Revolution and Its Impact on the Gulf Cooperation Countries - Beyond the Supply Shock
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-us-tight-oil-revolution-and-its-impact-on-the-gulf-cooperation-countries-beyond-the-supply-shock
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-20 11:03:32
[post_modified_gmt] => 2017-11-20 11:03:32
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-us-tight-oil-revolution-and-its-impact-on-the-gulf-cooperation-countries-beyond-the-supply-shock/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
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)
[49] => WP_Post Object
(
[ID] => 27398
[post_author] => 1
[post_date] => 2014-09-29 14:09:24
[post_date_gmt] => 2014-09-29 13:09:24
[post_content] => The surge in natural gas liquids (NGLs) supply accompanying US shale production has notably underpinned the domestic petrochemicals industry with cheap plant feedstock, particularly in the form of ethane. This has allowed US plants to forge a competitive global position in ethylene production and ushered in a new era of investments in the US petrochemicals sector. However, the impact of US NGLs production is not confined to the domestic petrochemicals sector. The emergence of the USA as a key global exporter of light-end commodities and purity products split from NGL streams is not just redrawing traditional trade patterns, it is also influencing wider market dynamics and global petrochemical feedstock trends and investment decisions. In this paper, we argue that while North American producers will lead the charge on cost-advantaged ethane-based ethylene production, petrochemicals markets will also adjust to support naphtha-based steam crackers based on growth in condensate exports and splitting capacity, particularly in markets east of Suez. Given these dynamics, the major spillover effect of US NGLs production on global petrochemical markets will be the provision of more optionality and feedstock alternatives between LPG and naphtha to global producers; this will ultimately act as a ‘balancing mechanism’ in global petrochemical markets outside the USA.
[post_title] => US NGLs Production and Steam Cracker Substitution: What will the Spillover Effects be in a Global Petrochemicals Market?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => us-ngls-production-and-steam-cracker-substitution-what-will-the-spillover-effects-be-in-a-global-petrochemicals-market
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 14:09:43
[post_modified_gmt] => 2016-03-01 14:09:43
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/us-ngls-production-and-steam-cracker-substitution-what-will-the-spillover-effects-be-in-a-global-petrochemicals-market/
[menu_order] => 0
[post_type] => publications
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[50] => WP_Post Object
(
[ID] => 27404
[post_author] => 1
[post_date] => 2014-08-26 14:13:09
[post_date_gmt] => 2014-08-26 13:13:09
[post_content] => While most recent analysis has focused on the potential impact of the US ‘tight oil’ revolution on global oil supplies and oil price levels, the impact on the shifts in trade flows and on the dynamics of price differentials has received much less attention. This is quite surprising, as the recent transformations in the US energy scene have manifested themselves most visibly through changes in crude oil and product flows with consequences on the behaviour of time spreads, inter-crude spreads, and the pricing of various crudes in relation to global benchmarks. This Comment explores some of the structural issues affecting WAF crude trade flows, providing a case study of how the US tight oil revolution is shaping oil market dynamics. The growth of US tight oil led to the first wave of structural change as the USA gradually backed out imports from West Africa, but because of a variety of factors (such as higher appetite from Asia, the loss of Libyan production making Europe switch to WAF barrels, and a spate of disruptions to WAF output) the loss of the US market was not fully felt on WAF crude prices. However, beyond these temporary factors, a couple of ongoing trends are forming the second wave of structural changes impacting West African differentials. The first of these is the changing structure of global refining. Much higher US, Russian, and Middle Eastern runs have meant that Europe is now the balancing point for global refining, a trend which is expected to continue. The second is the further backing out of WAF crudes from North America. While the USA largely backed out WAF grades by the second half of 2013, as domestic output and infrastructure continued to improve, this year has seen a significant increase in US crude exports to eastern Canada. As a result, Canadian imports of WAF crudes have fallen, implying that there is more crude oil available for clearing in the Atlantic Basin. In a way, WAF has become the swing barrel heading to North America, depending broadly on WTI–Brent differentials. But the implications have not been limited to markets in the USA and Canada. Since the marginal barrel sets the benchmark price, backed WAF barrels from North America are playing a more important role in the Brent price formation process.
[post_title] => New swings for West African crudes
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => new-swings-for-west-african-crudes
[to_ping] =>
[pinged] =>
[post_modified] => 2016-11-17 16:28:21
[post_modified_gmt] => 2016-11-17 16:28:21
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/new-swings-for-west-african-crudes/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
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[51] => WP_Post Object
(
[ID] => 27408
[post_author] => 1
[post_date] => 2014-07-22 09:48:14
[post_date_gmt] => 2014-07-22 08:48:14
[post_content] => Published paper can be found here
One of the major developments associated with the US shale revolution and that has attracted little attention from market analysts is the sharp expansion in US liquefied petroleum gas (LPG) exports. Substantial increase in domestic supply has not only meant that US imports of LPG have dwindled, but the US has now become one of the world’s biggest exporters of LPG. The sharp rise in US LPG exports is already having wide repercussions on global LPG market dynamics and trade flows. It is widely believed that the impact of higher US LPG exports will undermine the position of traditional exporters, mainly those in the Gulf Cooperation Council (GCC). First, as Asian consumers increase their purchase of US LPG in an attempt to diversify their sources of supply and gain access to cheaper LPG, GCC’s share of LPG exports to Asia is expected to fall. Second, LPG prices and the existing pricing mechanism may come under pressure from intense competition from US supplies. This paper argues that while US exports are a powerful force shaping LPG markets, it is also important to examine some of the internal dynamics within the key GCC producers, especially the rapid growth in domestic demand for LPG driven by the petrochemical sector. The drive towards diversification implies that a large percentage of the increment in production from the GCC will be used domestically. Liquid cracking could also offer opportunities for GCC producers to capture a larger share of the higher value petrochemical specialty products, which fits within GCC governments’ policies. These internal dynamics would lower the volumes of LPG available for exports from the region, and along with the expected growth in Asian demand for LPG, will moderate the impact of higher US LPG exports on prices. Furthermore, the cost of arbitrage between the US and Asia is likely to limit the impact on regional LPG prices, as prices in the US will have to fall substantially before the impact is felt in Asia. The biggest uncertainty however remains as to whether access to cheaper US LPG will induce Asian petrochemicals to start seeking alternative feedstock away from Middle East naphtha, which will have dramatic effect on LPG and naphtha markets and consequently on petrochemicals trade
[post_title] => The US Shale Revolution and the changes in LPG Trade Dynamics - A Threat to the GCC?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-us-shale-revolution-and-the-changes-in-lpg-trade-dynamics-a-threat-to-the-gcc
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:54:23
[post_modified_gmt] => 2016-02-29 15:54:23
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-us-shale-revolution-and-the-changes-in-lpg-trade-dynamics-a-threat-to-the-gcc/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
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[52] => WP_Post Object
(
[ID] => 27422
[post_author] => 1
[post_date] => 2014-04-02 11:23:33
[post_date_gmt] => 2014-04-02 10:23:33
[post_content] => Kuwait’s domestic electricity and water sector has been in disarray for several years, struggling with fast-rising demand for several decades as a result of rapid industrialization, population growth, rising living standards as well as due to the artificially low utility prices set by the government. We use a model-based methodology to compare the current pricing scheme against an alternative where consumer prices are raised to market levels and consumers are on average compensated by cash transfers that do not distort their economic decisions. Our main finding is that a realignment of prices at or closer to the market price level confers a benefit on current and future generations of Kuwaitis, in terms of fiscal savings, that outweighs the impact of raising electricity and water consumer prices to market price levels. Specifically, in the market price scenario with consumer prices at about ten times current levels, there is a total fiscal cost of about one-third of the value of fuel input used in the power sector (or about 1.5 per cent of GDP), entirely due to the cash transfer. This, however, is just less than one-fifth of the fiscal cost of the current low-price regime, and in principle represents a massive saving. The net benefit of moving to market prices is 6.3 per cent of GDP. By implication, if it is judged that a cash transfer scheme, undifferentiated by usage, can help gain acceptance for the price reform, it is shown to be affordable. We also show that the shift to market pricing will be a more efficient route to achieving spare capacity in the electricity and water system.
[post_title] => Price Reform in Kuwait's Electricity and Water Sector - Assessing the Net Benefits in the Presence of Congestion
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => price-reform-in-kuwaits-electricity-and-water-sector-assessing-the-net-benefits-in-the-presence-of-congestion
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-20 14:13:38
[post_modified_gmt] => 2017-11-20 14:13:38
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/price-reform-in-kuwaits-electricity-and-water-sector-assessing-the-net-benefits-in-the-presence-of-congestion/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[53] => WP_Post Object
(
[ID] => 27426
[post_author] => 1
[post_date] => 2014-03-17 13:32:45
[post_date_gmt] => 2014-03-17 13:32:45
[post_content] => The political turmoil that has swept across many parts of the Middle East and North Africa (MENA) since the beginning of the Arab Spring in December 2010 and the tightening of international sanctions against Iran in 2012 have reignited the recurring debate about energy security and the reliability of MENA as an energy supplier. In this paper, we examine the impact of the past three years of political turmoil in MENA on oil and gas markets. We argue that although many disruptions did occur and oil prices did rise, especially following the Libyan revolution in 2011 and when fears of a potential military confrontation between Iran and the USA intensified in early 2012, the short-term effects on oil and gas markets of recent events in the region have been less dramatic than originally feared. The Arab Spring did not destabilize the large Gulf oil and gas producers; the rise in oil price induced by political and geopolitical factors proved to be transient; and oil and gas markets have shown relative resilience in filling the supply gap and in redirecting oil and gas trade flows. Beyond the immediate impact of the past three years of political turmoil in the MENA, however, we argue that it is the more subtle, long-term effects of regional political instability and international sanctions that are likely to leave the most lasting mark on regional oil and gas markets. Potential repercussions are likely to be felt through several years of an unstable regulatory and investment environment, policy uncertainty, deteriorating security, and a lack of much needed energy pricing reform that will impact the long-term production and export capacity of various MENA oil and gas producers, including some of those unaffected directly by the Arab Spring and sanctions.
[post_title] => The Arab Uprisings and MENA Political Instability - Implications for Oil & Gas Markets
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-arab-uprisings-and-mena-political-instability-implications-for-oil-gas-markets
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-20 14:15:52
[post_modified_gmt] => 2017-11-20 14:15:52
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-arab-uprisings-and-mena-political-instability-implications-for-oil-gas-markets/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
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)
[54] => WP_Post Object
(
[ID] => 27452
[post_author] => 1
[post_date] => 2013-12-20 15:10:46
[post_date_gmt] => 2013-12-20 15:10:46
[post_content] => This comment explores the links between Saudi Arabia’s export policy, US oil market balances, and the price dynamics of US benchmarks. The authors argue that one of the biggest surprises to the market has been the resilience of US crude import despite falling US prices. As a result, the fate of US benchmarks is not just linked to US production growth and infrastructure logistics such as pipelines and rail, but also to a development that could impact global oil markets –whether Saudi Arabia decides to defend prices by reducing production should other producers increase output or relinquishes its role as the swing producer and becomes protective of its market share. Should market fundamentals weaken enough and Saudi Arabia decides to maintain its output at current levels, the US Gulf Coast (USGC) remains the lowest cost option for signaling global intentions, and the damage to prices can be confined to one part of the world. As the oil glut in the US intensifies, the debates surrounding exports of light grades from the US, or at the very least, swaps of Eagle Ford lights with Mexican Maya, are likely to gain traction in 2014. The issue then becomes whether it is US crudes, particularly light grades, that disconnect severely from the rest of the world once again or would the rest of the world share the impacts of growing US production as more crude becomes globally available. So far, US policymakers have avoided the controversial and politically sensitive issue of whether to allow exports of light crude. This issue however cannot be kept under wraps for much longer.
[post_title] => The Swing Producer, the US Gulf Coast, and the US Benchmarks - The Missing Links
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-swing-producer-the-us-gulf-coast-and-the-us-benchmarks-the-missing-links
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 14:33:39
[post_modified_gmt] => 2016-03-01 14:33:39
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-swing-producer-the-us-gulf-coast-and-the-us-benchmarks-the-missing-links/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[55] => WP_Post Object
(
[ID] => 27454
[post_author] => 1
[post_date] => 2013-12-16 12:27:56
[post_date_gmt] => 2013-12-16 12:27:56
[post_content] => This comment analyses the recent refining dynamics in the GCC and their implications on local and global petroleum products markets and trade flows. The authors argue that the recent expansion plans in the GCC will have important implications on global petroleum products trade flows, constituting an additional source of competition for Asian and European refineries that could weigh down on refining margins, especially in Europe. While this represents a challenge for GCC refineries, it can also open up new opportunities for regional NOCs to build their trading capability in products markets and diversify their export base by increasing the export share of petroleum products and opening new markets. However, in the medium to long-term, the refining sector in the GCC will continue to be shaped by local dynamics, particularly by the ability of some of the countries to expand and upgrade their refining capacity and, more importantly, by the evolution of domestic demand. In the absence of any serious energy pricing reform that could rationalize the growth in demand for refined products, the race between expanding refining capacity, satisfying rising demand, and maintaining exports will continue; it is the outcome of this race which will ultimately determine the region’s position in global products markets in the next decade.
[post_title] => Refining Dynamics in the GCC and Implications for Trade Flows
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => refining-dynamics-in-the-gcc-and-implications-for-trade-flows
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 14:34:37
[post_modified_gmt] => 2016-03-01 14:34:37
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/refining-dynamics-in-the-gcc-and-implications-for-trade-flows/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[56] => WP_Post Object
(
[ID] => 27466
[post_author] => 1
[post_date] => 2013-09-12 17:29:52
[post_date_gmt] => 2013-09-12 16:29:52
[post_content] => Historically, the industry has had a very poor record in predicting oil prices and key fundamental shifts in the oil market, and this time is no different. Not only did most industry and oil market analysts fail to predict the scale of the tight oil revolution, but now that the pendulum has swung in the opposite direction, expectations regarding the impact of the tight oil revolution on global supply dynamics and international prices appear overhyped. However, contrary to the general view in the market that the abundance of tight oil would cause both a sharp drop in oil prices and create a supply glut in crude or refined products, neither has really materialized. This raises a key question: how can the oil market be undergoing a revolution without its effects being felt on global oil prices? One may argue that the impact of shale oil on prices and oil market dynamics is yet to be felt, as some of the underlying forces still need time to unfold. However, we find such an argument unconvincing. If, during the last three years, the large positive US supply shock failed to cause sharp price falls, why would a rise in US supply now bring about falling prices over the next few years? Instead, in this note, we argue that there are some fundamental weaknesses and flaws in the analysis underlying the ‘oil price-collapsing’ scenario and ‘hyped expectations’; current projections of the impact of shale on global oil market dynamics are hence likely to produce ‘off the mark’ predictions once again. We also argue that the current debate neglects some key areas in which the tight oil revolution is likely to have its biggest impact – namely on crude oil and product trade flows, on price differentials, and on the global markets for natural gas liquids.
[post_title] => The US Tight Oil Revolution in a Global Perspective
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-us-tight-oil-revolution-in-a-global-perspective
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 14:37:14
[post_modified_gmt] => 2016-03-01 14:37:14
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-us-tight-oil-revolution-in-a-global-perspective/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[57] => WP_Post Object
(
[ID] => 27468
[post_author] => 1
[post_date] => 2013-08-22 10:05:02
[post_date_gmt] => 2013-08-22 09:05:02
[post_content] => In January 2013, the Government of India began deregulating the retail price of diesel by permitting Oil Marketing Companies to progressively raise retail prices over a period of several months, until their losses from the subsidization of diesel were completely offset. This policy decision represents one of the final stages of the ‘decontrol’ of prices for diesel and gasoline. Two key questions which arise from these recent measures are (a) whether they will play a role in slowing the pace of growth in India’s oil consumption, and (b) whether they have impacted the structure of India’s demand for petroleum products, and whether these reforms could make a difference to the economic situation in relation to fuel subsidies. This Comment therefore focuses on the potential impacts of these important reforms on Indian diesel demand.
The argument in this Comment can be viewed as being in three parts. The first looks at the Indian reforms in the context of wider literature on the response of demand to the progressive elimination of subsidies – arguing that, contrary to the expectation that higher prices lead to a reduction in demand, for a developing economy like India, the demand for diesel is likely to continue growing as income effects are stronger than price effects. However, the second argues that the price effects by themselves are quite complex; the lag between reforming the prices of different petroleum products, and the relative price changes which have prompted substitution between them, complicates the dynamics of demand. And third, it argues that India’s system of differential taxation at the state level could lead to outcomes completely different to those intended by reform at the federal level, particularly in relation to subsidy removal.
[post_title] => Diesel Pricing Reforms in India – a Perspective on Demand
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => diesel-pricing-reforms-in-india-a-perspective-on-demand
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 14:40:00
[post_modified_gmt] => 2016-03-01 14:40:00
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/diesel-pricing-reforms-in-india-a-perspective-on-demand/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[58] => WP_Post Object
(
[ID] => 27470
[post_author] => 1
[post_date] => 2013-07-29 10:59:03
[post_date_gmt] => 2013-07-29 09:59:03
[post_content] => It’s that time of year again when Saudi Arabia’s domestic oil and gas consumption is in the limelight. Saudi Arabia faces sharp upward swings in oil demand during the summer, raising some market concerns about its export potential during the summer months. These sharp demand swings could influence oil prices, especially at times when the call on Saudi output is high and rising and when oil fundamentals are perceived to be tight. This comment argues that in order to understand the underlying dynamics behind such swings in oil demand, it is important to focus on the structure of the power sector, and on the evolution of the fuel mix in this sector. It concludes that while Saudi Arabia has some options in the long term (post 2020), the consumption of liquid fuels in the power sector will continue to present a challenge to Saudi policy makers in the short to medium term. For the next few years, liquids consumption by the power sector will continue to increase at a rapid pace, driven by rapid growth in electricity demand, low energy and electricity prices, and by infrastructure and technical constraints that will prevent higher penetration of gas in the power sector.
[post_title] => Summer Again - The Swing in Oil Demand in Saudi Arabia
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => summer-again-the-swing-in-oil-demand-in-saudi-arabia
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:41:32
[post_modified_gmt] => 2016-02-29 15:41:32
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/summer-again-the-swing-in-oil-demand-in-saudi-arabia/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[59] => WP_Post Object
(
[ID] => 27475
[post_author] => 1
[post_date] => 2013-06-28 11:50:01
[post_date_gmt] => 2013-06-28 10:50:01
[post_content] => The recent growth in US oil output has been impressive. From a negative annual growth in 2008, the US added around one million b/d in liquid production in 2012 with similar growth expected for 2013. Looking at global oil supplies from the US perspective gives the impression of plenty. However, in this presentation, Dr Fattouh argues that there is a risk in building one’s analysis on US developments alone. So far, the US contribution to global oil supplies has been camouflaged by the poor supply prospects in non-OPEC supply outside the US which still suffer from high decline rates, project delays, cost overruns and geopolitical outages. Having said that, one should not look at the developments in the US only in terms of a positive supply shock. The growth in US oil output has changed the perception of markets from oil scarcity, a few years ago, to oil abundance. It has also changed the dynamics of trade flows, with traditional exporters to the US forced to find new markets for their crude oil, with implications on oil price levels and differential dynamics. Also for the first time in years, US policy matters specifically with regard to its policy concerning exports of crude oil and natural gas. Finally, the way the US perceives itself vis-à-vis the rest of the world could change if the US thinks it could achieve energy independence.
[post_title] => The US Tight Oil Revolution - What Kind of a Revolution?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-us-tight-oil-revolution-what-kind-of-a-revolution
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:40:27
[post_modified_gmt] => 2016-02-29 15:40:27
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-us-tight-oil-revolution-what-kind-of-a-revolution/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[60] => WP_Post Object
(
[ID] => 27497
[post_author] => 1
[post_date] => 2013-01-23 11:06:09
[post_date_gmt] => 2013-01-23 11:06:09
[post_content] => The main purpose of this paper is to review the evolution of OPEC models and to link this evolution to some key events in the oil market. Our main conclusion is that OPEC’s pricing power varies over time. There are many instances in which OPEC can lose the power to limit oil price movements – either up or down. Such changes in pricing power are brought about by market conditions and can occur both in weak and tight market conditions. Because of OPEC’s varying conduct, there is no single model that fits its behaviour and hence analysts have been forced to choose from a wide range of models to explain certain episodes. The empirical literature has not been successful in distinguishing between the various competing models, as these models offer very similar predictions. This paper is forthcoming in the Annual Review of Resource Economics.
[post_title] => OPEC - What Difference has it Made?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => opec-what-difference-has-it-made
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-20 14:51:26
[post_modified_gmt] => 2017-11-20 14:51:26
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/opec-what-difference-has-it-made/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[61] => WP_Post Object
(
[ID] => 27503
[post_author] => 1
[post_date] => 2013-01-08 15:42:21
[post_date_gmt] => 2013-01-08 15:42:21
[post_content] => Like no other region, energy resources have shaped the Arab world and its modern-day development trajectory. Endowed with some of the world’s most important oil and natural gas reserves, countries in the Arab world have over the past four decades produced and exported more oil than those of any other region, and hold reserves sufficient to supply world energy markets for more than another hundred years at current rates of production. Its energy wealth has benefited the Arab world, despite significant differences across the region alongside differing national resources, and their management across governments. Significant challenges also derive from the Arab energy led development model, particularly patterns of domestic energy consumption, rising demand for energy across the region, and rising domestic investment needs. This paper, by Bassam Fattouh and Laura El-Katiri, published by the UNDP, attempts to provide a very brief overview of the role energy has played in driving economic development in the Arab world, its effects on development choices, and the challenges faced by the resultant development model. It does so by looking at four different aspects of energy-led development: 1) the effect of energy on regional Arab economic growth; 2) the inter-linkages between energy and Arab economic structures; 3) the implications of energy for intra-regional integration; and 4) evolving challenges from this development model.
Please follow the link to access the paper.
[post_title] => Energy and Arab Economic Development
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => energy-and-arab-economic-development
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 14:46:50
[post_modified_gmt] => 2016-03-01 14:46:50
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/energy-and-arab-economic-development/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[62] => WP_Post Object
(
[ID] => 27504
[post_author] => 1
[post_date] => 2012-12-19 11:30:56
[post_date_gmt] => 2012-12-19 11:30:56
[post_content] => The discovery of sizable gas resources in the Levant Basin, a geological structure that straddles the territorial waters of Cyprus, Israel, the Palestinian Territories, Lebanon, and Syria, has the potential to be game-changing for the East Mediterranean region. Hitherto net energy importers, these countries are now faced with the prospect of long-term energy self-sufficiency and the development of a new revenue stream for the economy. With the resource potential of the Levant Basin believed to be much higher than the 35 Tcf of gas discovered recently, the East Mediterranean is now the focus of much interest on the part of major upstream investors. However, in the short to medium term, the development and monetisation of these resources present stakeholders with a set of challenges originating in the region’s complex political make-up, as well as in the fact that their energy and gas utilisation policies are still work in progress, over and above the technical difficulties relating to the development of these resources. This paper examines the challenges and opportunities that have been given rise to by these discoveries, arguing that to 2020 East Mediterranean gas is more likely to be a game-changer for local energy systems than for regional and international gas markets.
[post_title] => East Mediterranean Gas - what kind of a game-changer?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => east-mediterranean-gas-what-kind-of-a-game-changer
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-20 14:56:32
[post_modified_gmt] => 2017-11-20 14:56:32
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/east-mediterranean-gas-what-kind-of-a-game-changer/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[63] => WP_Post Object
(
[ID] => 27507
[post_author] => 1
[post_date] => 2012-12-04 10:11:02
[post_date_gmt] => 2012-12-04 10:11:02
[post_content] => In the last decade, purely financial players with no interest in the physical commodity such as hedge funds, pension funds, insurance companies, and retail investors have become more prominent in oil futures and derivatives markets. In parallel, there has been an explosion in the variety of instruments that permit speculation in oil. These movements in financial participation bear some rough relation to the oil price. Some have been led to conclude that greater financial participation has changed oil price behaviour. There have even been calls for policy intervention to limit financial participation in oil per se.
In this comment, we discuss recent research on whether underlying changes in the incentives and constraints of purely financial players could have interfered with the workings of the oil market. We find no support for the view that greater financialization has had an important effect on oil market variables and harmed final consumers. In contrast, shifts expectations of supply and demand can have important impacts on prices, spreads, welfare, and even on financial market participation. Therefore, before oil financial market policies are contemplated, it is crucial in the first instance to identify the channels through which financialization can result in market failure.
[post_title] => Financialization in Oil Markets - lessons for policy
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => financialization-in-oil-markets-lessons-for-policy
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 14:48:36
[post_modified_gmt] => 2016-03-01 14:48:36
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/financialization-in-oil-markets-lessons-for-policy/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[64] => WP_Post Object
(
[ID] => 27508
[post_author] => 1
[post_date] => 2012-12-04 10:05:03
[post_date_gmt] => 2012-12-04 10:05:03
[post_content] => The main objectives of this paper are to assess whether financialization can impact oil market behaviour over and above structural fundamental changes, and whether these changes affect final consumers' welfare. While shifts arising in financial investors' preferences and wealth can explain the rise in participation of purely financial investors, they fail to explain key features such as the movements in the basis. Instead, anticipated changes in the physical layer of the oil market can better explain many of the features often attributed to financialization. We also find that greater financialization has no harmful effects on consumer welfare. Our paper shows that from a regulatory point of view, it is crucial in the first instance to identify the channels through which financialization can result in market failure and then design policies accordingly.
[post_title] => Assessing the Financialization Hypothesis
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => assessing-the-financialization-hypothesis
[to_ping] =>
[pinged] =>
[post_modified] => 2018-01-25 14:51:28
[post_modified_gmt] => 2018-01-25 14:51:28
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/assessing-the-financialization-hypothesis/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[65] => WP_Post Object
(
[ID] => 27521
[post_author] => 1
[post_date] => 2012-07-12 10:13:48
[post_date_gmt] => 2012-07-12 09:13:48
[post_content] => While higher fuel specifications and regulatory changes in the bunkers market are most likely to have a big impact on long-term fuel oil demand, a structural shift of a similar magnitude on the supply side is already taking place, particularly in Russia, the largest exporter of fuel oil. The Russian government’s firmly stated commitment to the regeneration of its country’s refining industry and its determination to ensure that domestic demand for higher quality products is met would suggest that, although the exact timing of a reduction in fuel oil production may be unclear, a sharp decline in fuel oil exports by 2016 seems inevitable. We show that in the past, price relationships between high sulphur and low sulphur fuel oil and between heavy fuel oil and crude oil and diesel have been subject to structural breaks, but price movement did not increase or decrease without bounds as the refining industry continued to adjust to increasing demand for petroleum products and changing global demand patterns towards cleaner products. Looking ahead, as investment in refining capacity expands and as upgrading of refining units accelerates in Russia and elsewhere, price spreads are likely to exhibit similar behaviour to that in the past few years. This does not imply that structural breaks in the price relationships will not occur. For instance, governments’ desire to implement more stringent requirements without ensuring that the refining infrastructure is ready for such a shift or delays in refining projects will most likely destabilise the behaviour of price differentials, though the timing and the nature of such potential breaks (abrupt of gradual) remain highly uncertain.
[post_title] => The Impact of Russia's Refinery Upgrade Plans on Global Fuel Oil Markets
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-impact-of-russias-refinery-upgrade-plans-on-global-fuel-oil-markets
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-21 10:56:08
[post_modified_gmt] => 2017-11-21 10:56:08
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-impact-of-russias-refinery-upgrade-plans-on-global-fuel-oil-markets/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[66] => WP_Post Object
(
[ID] => 28169
[post_author] => 1
[post_date] => 2012-04-18 14:49:30
[post_date_gmt] => 2012-04-18 13:49:30
[post_content] => The financialization of oil futures markets has been held responsible for a variety of phenomena including changes in price volatility, increased co-movement between oil futures prices and other financial asset and commodity prices, a breakdown of the statistical relationship between oil inventories and the price of oil, and an increased influence of the decisions of financial investors such as swap dealers, hedge funds and commodity index traders on the oil futures price. Most importantly, there is a perception that oil futures markets no longer adequately perform their functions of price discovery and risk transfer. In this presentation, Dr Fattouh reviews the evidence in the academic literature and evaluates to what extent it provides support for the proposed effects of financialization.
[post_title] => The Financialization of Oil Markets: Potential Impacts and Evidence
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-financialization-of-oil-markets-potential-impacts-and-evidence-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:26:03
[post_modified_gmt] => 2016-02-29 15:26:03
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-financialization-of-oil-markets-potential-impacts-and-evidence-2/
[menu_order] => 0
[post_type] => publications
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[67] => WP_Post Object
(
[ID] => 27538
[post_author] => 1
[post_date] => 2012-04-11 11:05:28
[post_date_gmt] => 2012-04-11 10:05:28
[post_content] => To most analysts, the combination of geopolitical and economic factors constitutes a ‘perfect storm’ that will keep an upward pressure on oil the price for the rest of 2012. The purpose of this short article is to broaden the debate and consider some potential weaknesses in the dominant story. The article will highlight three main points. First, the premises upon which the story of tightened market fundamentals is built are subject to a wide degree of uncertainty. Second, the channels expected to put an upward pressure on the oil price are not exogenous: they tend to interact with each other and are shaped in part by oil price behaviour. Finally, the feedback from policy circles seems to be different this time from that seen in the previous oil price cycle, and thus should not be ignored. This is not to say that dominant expectations of very tight market fundamentals may not materialize. They may well do, but this is not a foregone conclusion.
[post_title] => Oil Markets in 2012: Calm or Turbulent Waters?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => oil-markets-in-2012-calm-or-turbulent-waters
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:25:36
[post_modified_gmt] => 2016-02-29 15:25:36
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/oil-markets-in-2012-calm-or-turbulent-waters/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
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[68] => WP_Post Object
(
[ID] => 28178
[post_author] => 1
[post_date] => 2012-03-30 12:06:27
[post_date_gmt] => 2012-03-30 11:06:27
[post_content] => A popular view is that the surge in the price of oil during 2003-08 cannot be explained by economic fundamentals, but was caused by the increased financialization of oil futures markets, which in turn allowed speculation to become a major determinant of the spot price of oil. This interpretation has been driving policy efforts to regulate oil futures markets. This survey reviews the evidence supporting this view. We identify six strands in the literature corresponding to different empirical methodologies and discuss to what extent each approach sheds light on the role of speculation. We find that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003. However there is evidence that both oil futures price and spot prices were driven by the same economic fundamentals.
[post_title] => The Role of Speculation in Oil Markets: What Have We Learned So Far?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-role-of-speculation-in-oil-markets-what-have-we-learned-so-far-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 14:58:37
[post_modified_gmt] => 2016-03-01 14:58:37
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-role-of-speculation-in-oil-markets-what-have-we-learned-so-far-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[69] => WP_Post Object
(
[ID] => 28187
[post_author] => 1
[post_date] => 2012-03-06 15:06:26
[post_date_gmt] => 2012-03-06 15:06:26
[post_content] => Despite the existence of other regional crudes with a much larger physical base, more than 25 years have now passed, and most cargoes from the Gulf destined for Asia are still priced against Dubai. Nevertheless, the nature of the Dubai benchmark has evolved and many of the institutional and pricing details have witnessed major transformations, driven in large part by the decline in Dubai’s oil production and innovations in the pricing mechanisms introduced in the 2000s. In theory (and in practice to some extent), the price of Dubai may be identified from the financial layers that have emerged around Dubai and Brent. The Brent complex sets the price level for Dubai while the EFS and the inter-month Dubai spread market set the price differentials against Brent. Since physical benchmarks constitute the pricing basis of the large majority of physical transactions, some observers claim that derivatives instruments such as futures and swaps derive their value from the price of these physical benchmarks. However, this is a gross over-simplification and does not accurately reflect the process of crude oil price formation in the case of Dubai.
[post_title] => The Dubai Benchmark and its Role in the International Oil Pricing System
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-dubai-benchmark-and-its-role-in-the-international-oil-pricing-system-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:25:00
[post_modified_gmt] => 2016-02-29 15:25:00
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-dubai-benchmark-and-its-role-in-the-international-oil-pricing-system-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[70] => WP_Post Object
(
[ID] => 28190
[post_author] => 1
[post_date] => 2012-02-21 10:11:01
[post_date_gmt] => 2012-02-21 10:11:01
[post_content] => This paper, authored by Bassam Fattouh and Laura El-Katiri and published by the United Nations Development Programme, explores the issue of energy subsidies in the Arab World. The authors argue that while energy subsidies may be seen as achieving social objectives (such as expanding energy access and protecting poor households’ incomes); economic objectives (such as fostering industrial growth and smoothing domestic consumption); and political objectives (such as distributing the oil and natural gas rents to the population), they are a costly and inefficient way of doing so. Energy subsidies distort price signals, with serious implications on efficiency and the optimal allocation of resources. Energy subsidies also tend to be regressive, with high-income households and industries benefiting proportionately most from low energy prices. However, despite such adverse effects, energy subsidies constitute an important social safety net for the poor in many parts of the Arab world, and any attempts to reduce or eliminate them in the absence of compensatory programmes would lead to a decline in households’ welfare and erode the competitiveness of certain industries. Therefore, a critical factor for successful reforms will be the ability of governments to compensate their populations for the reduction or removal of subsidies through carefully designed mitigation measures. It is argued that reform of energy pricing mechanisms in the Arab world may be seen as beneficial from more than one perspective. Nevertheless, this paper recognises that the current political climate in the region will render the reform of domestic energy prices difficult in practice, such that reform may indeed be a medium- to long-term endeavour.
Please follow the link to access the paper.
[post_title] => Energy Subsidies in the Arab World
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => energy-subsidies-in-the-arab-world-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 14:59:51
[post_modified_gmt] => 2016-03-01 14:59:51
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/energy-subsidies-in-the-arab-world-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[71] => WP_Post Object
(
[ID] => 28191
[post_author] => 1
[post_date] => 2012-02-10 10:02:25
[post_date_gmt] => 2012-02-10 10:02:25
[post_content] => The exchange of threats between Iran and the West vis-à-vis Iranian oil exports to European and other consumer countries has received wide attention among policy makers and analysts; IMF officials predict that crude oil prices could increase by as much as 30 percent in case of a halt of Iran's exports to OECD countries, and if other sources don’t offset the loss of Iranian crude oil. Others claim that all the elements are set for ‘the $200 a barrel scenario’. However, this commentary offers a less pessimistic view, and argues that the potential impacts of such threats on oil market dynamics are often exaggerated. Oil embargos against individual producing countries are in reality difficult to implement, for they require a concerted effort by a large number of buyers to prevent oil producers from diverting crude oil from one market to another. Where they result in a tightening of oil markets and rising prices for consumer nations, they can be relaxed or amended. As for the use of an Iranian oil weapon, the fact remains that despite continuous threats, Iran has never used the oil weapon; the oil weapon remains an indiscriminate policy measure that all producers, including Iran, are reluctant to use; and if ever employed, it is likely to be ineffective and counterproductive from a producer’s point of view. Nevertheless, fears that governments may pursue policies to restrict the flow of energy supplies rattle markets and place a premium on the oil price and contribute to increased price volatility.
[post_title] => On Oil Embargos and the Myth of the Iranian Oil Weapon
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => on-oil-embargos-and-the-myth-of-the-iranian-oil-weapon-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 15:00:31
[post_modified_gmt] => 2016-03-01 15:00:31
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/on-oil-embargos-and-the-myth-of-the-iranian-oil-weapon-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[72] => WP_Post Object
(
[ID] => 27567
[post_author] => 1
[post_date] => 2011-09-13 12:07:52
[post_date_gmt] => 2011-09-13 11:07:52
[post_content] => The events that took place in the Arab world in the opening months of 2011 mark a watershed in the history of the Middle East and North Africa (MENA) region. Given the importance of MENA energy supplies in global economic terms, the political unrest witnessed by the region has caused widespread fears about the prospect of energy supply disruptions. With international oil and gas prices beginning to rise from 2010, there was serious concern among market and political actors that any further increase in prices would put at risk the fragile recovery of the global economy from the deepest recession in decades. This paper examines the significance of the recent Arab uprisings and their implications for regional and global oil and gas markets. It argues that, although markets were able to cope resiliently in the short term, there remains much uncertainty about the likely longer-term implications of the recent events.
[post_title] => The Implications of the Arab Uprisings for Oil and Gas Markets
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-implications-of-the-arab-uprisings-for-oil-and-gas-markets
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-20 14:59:52
[post_modified_gmt] => 2017-11-20 14:59:52
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-implications-of-the-arab-uprisings-for-oil-and-gas-markets/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[73] => WP_Post Object
(
[ID] => 28215
[post_author] => 1
[post_date] => 2011-08-12 12:38:13
[post_date_gmt] => 2011-08-12 11:38:13
[post_content] => While much of the emphasis of the literature on energy poverty is on the prevalence of the phenomenon in sub-Saharan Africa and South Asia, little has been written about energy poverty in the Arab world. Traditionally having being seen as one of the world’s most energy rich regions, the Arab world has in recent years often been overlooked as a region which suffers severely from energy poverty itself. In 2002, about 65 million people in the Arab world had no access to electricity, and an additional 60 million were severely undersupplied in both urban and rural areas. In terms of cooking and heating, almost one-fifth of the Arab population rely on non-commercial fuels like wood, dung, and agricultural residues particularly in Comoros, Djibouti, Sudan, Yemen, and Somalia but also in Algeria, Egypt, Morocco, and Syria. This study by Laura El-Katiri and Bassam Fattouh fills a gap in the existing literature by looking at the case of prevailing energy poverty in Yemen, one of the poorest countries in the Arab world. The Yemeni case is particularly interesting because of the country’s status as a net energy exporter. Large segments of the Yemeni population both in rural and urban areas rely heavily on traditional fuels such as firewood and dung while electrification rates in Yemen is relatively low where only 54% of Yemeni households have access to electricity. Decades of underinvestment and lack of necessary infrastructure, and Yemen’s prevailing poverty problem have all contributed to this status, as has the country’s fractured political system.
[post_title] => Energy Poverty in the Arab World: The Case of Yemen
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => energy-poverty-in-the-arab-world-the-case-of-yemen
[to_ping] =>
[pinged] =>
[post_modified] => 2017-11-20 14:58:30
[post_modified_gmt] => 2017-11-20 14:58:30
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/energy-poverty-in-the-arab-world-the-case-of-yemen-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[74] => WP_Post Object
(
[ID] => 28224
[post_author] => 1
[post_date] => 2011-06-16 15:38:54
[post_date_gmt] => 2011-06-16 14:38:54
[post_content] => This presentation analyses the impact of the recent oil market disruption on oil market dynamics and price behaviour. It makes the following observations. In historical perspective, the current oil market disruption has been small so far. However, the main concern for the market is the geopolitical context in which the disruption has occurred. There are fears that current events would engulf other key oil exporters. These have caused market players to update their beliefs about the probability of disruptions from the region. This process of updating beliefs plus the fact that there has been an actual loss of output has induced changes in price levels. While sharp price rises and increased volatility have raised doubts about the effectiveness of the market mechanisms and the role of speculators in the oil price formation process, the fact remains that the oil market has shown great resilience in dealing with the Libyan physical disruption. This has occurred mainly through adjustment in price differentials between crude oil markets, time spreads, crude and products markets and between various petroleum products. Movements in price levels have been less important than price differentials for the adjustment process with these movements reflecting an increased perception of lack of feedbacks from demand and supply that are needed to put a ceiling on the oil price.
[post_title] => Oil Market Dynamics in Turbulent Times
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => oil-market-dynamics-in-turbulent-times-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:19:43
[post_modified_gmt] => 2016-02-29 15:19:43
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/oil-market-dynamics-in-turbulent-times-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[75] => WP_Post Object
(
[ID] => 28229
[post_author] => 1
[post_date] => 2011-04-11 12:12:21
[post_date_gmt] => 2011-04-11 11:12:21
[post_content] => In this presentation, Dr Fattouh considers six key questions that are important for any analysis of the future evolution of OPEC: In a falling market how tolerant is OPEC or some of its players to a decline in market share? Will OPEC remain passive to oil substitution policies as a result of energy security and climate change agendas? Does OPEC has the incentive to increase market share? Can OPEC increase production capacity to fill the projected non-OPEC supply-demand gap? Is OPEC behaviour symmetric to rising and falling market? What is the impact of OPEC investment policy on oil market structure and price formation process?
[post_title] => Oil Market and OPEC Behaviour: Looking Ahead
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => oil-market-and-opec-behaviour-looking-ahead-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:19:15
[post_modified_gmt] => 2016-02-29 15:19:15
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/oil-market-and-opec-behaviour-looking-ahead-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[76] => WP_Post Object
(
[ID] => 28233
[post_author] => 1
[post_date] => 2011-03-30 09:43:19
[post_date_gmt] => 2011-03-30 08:43:19
[post_content] => One of the major features of the oil market during the 1990s was the relative stability of the long-term oil price. While the spot price and the price of near-term futures contracts sometimes exhibited sharp price volatility that volatility was only partially transmitted to the back end of the futures curve which was anchored around the $20-22/barrel range. However as oil prices rose sharply during the boom years the consensus on the oil price that would balance the long term fundamentals of the oil market broke down and the whole futures curve became subject to a series of shifts. Our empirical evidence suggests that in the late 1990s and early 2000s there was limited evidence of adjustment between short-term and long-term oil prices. These dynamics however changed in early 2005 with the long term price making most of the adjustment towards the prompt price. We suggest an interpretation of the long-term behaviour of oil prices based on the insights of two models. The first is based on a signal extraction mechanism and shows that when the private beliefs by investors about the long-run determinants of oil prices become less precise relative to the information contained in the current spot price then the expected future oil price becomes closer to the current spot price. The second model is based on Bayesian updating and shows that if the variability of the spot price increases and/or if the spot price remains higher over a sustained period of time than anticipated by investors then the probability distribution of the parameter capturing the speed of mean reversion will shift and the expected future price will move closer to the current spot price. Our analysis predicts that in the face of increased uncertainty the long-term and short-term prices are bound to exhibit similar movements. These changes had important consequences on the oil price formation process.
[post_title] => Uncertainty, Expectations, and Fundamentals: Whatever Happened to Long-Term Oil Prices?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => uncertainty-expectations-and-fundamentals-whatever-happened-to-long-term-oil-prices-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:16:55
[post_modified_gmt] => 2016-02-29 15:16:55
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/uncertainty-expectations-and-fundamentals-whatever-happened-to-long-term-oil-prices-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[77] => WP_Post Object
(
[ID] => 28236
[post_author] => 1
[post_date] => 2011-02-14 10:46:28
[post_date_gmt] => 2011-02-14 10:46:28
[post_content] => The main purpose of this report is to analyse the main features of the current crude oil pricing system; to describe the structure of the main benchmarks currently used namely Brent West Texas Intermediate (WTI) and Dubai-Oman; to clearly identify the various financial layers that have emerged around these physical benchmarks; to analyse the links between the different financial layers and between the financial layers and the physical benchmarks; and then to evaluate how these links influence the price discovery and oil price formation process in the crude oil market. The report finds that the assumption that the process of identifying the price of benchmarks in the current oil pricing system can be isolated from financial layers is rather simplistic. The different layers of the oil market are highly interconnected and form a complex web of links, all of which play a role in the price discovery process. The report also calls for broadening the empirical research to include the trading strategies of physical players; any analysis limited to non-commercial participants in the futures market and their role in the oil price formation process is incomplete. The report also emphasises the distinction between trade in price differentials and trade in price levels and finds that the level of the oil price, which consumers producers and their governments are most concerned with is not the most relevant feature in the current pricing system. Instead the identification of price differentials and the adjustments in these differentials in the various layers underlie the basis of the current oil pricing system.
[post_title] => An Anatomy of the Crude Oil Pricing System
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => an-anatomy-of-the-crude-oil-pricing-system-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:16:29
[post_modified_gmt] => 2016-02-29 15:16:29
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/an-anatomy-of-the-crude-oil-pricing-system-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[78] => WP_Post Object
(
[ID] => 28237
[post_author] => 1
[post_date] => 2011-01-28 00:00:53
[post_date_gmt] => 2011-01-28 00:00:53
[post_content] => On January 28 2011 the Oxford Institute for Energy Studies held a one-day conference on ‘Regulation of Oil Markets: Current Reforms and Implications’. The conference focused 1) The inter-linkages between the physical and financial layers in the current international oil pricing system and the role of these linkages in the oil price discovery process; 2) An assessment and evaluation of the current regulatory reforms of oil derivatives and the implications of these regulatory changes on the price discovery process oil trading activity and the long-term strategies of market participants. The group of participants included key senior figures from government oil companies the financial industry and academia. The conference was conducted under the Chatham House Rule of non-attribution. This presentation introduced the themes for the day.
[post_title] => Inter-linkages and Regulation of Oil Derivatives
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => inter-linkages-and-regulation-of-oil-derivatives-2
[to_ping] =>
[pinged] =>
[post_modified] => 2011-01-28 00:00:53
[post_modified_gmt] => 2011-01-28 00:00:53
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/inter-linkages-and-regulation-of-oil-derivatives-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[79] => WP_Post Object
(
[ID] => 28247
[post_author] => 1
[post_date] => 2010-09-06 09:31:42
[post_date_gmt] => 2010-09-06 08:31:42
[post_content] => The current oil pricing system has now survived for almost a quarter of a century, longer than the OPEC administered system did. While some of the details have changed, the fundamentals of the current system have remained the same since the mid 1980s. In the light of the 2008-2009 price swings, the current oil pricing system has received wide criticisms with some observers calling for its radical overhaul. These calls are constant reminder of the unease that some observers feel about the current oil pricing system. This comment analyses the oil pricing system highlighting some of its main features and drawing the linkages between the physical and financial dimensions of the oil market.
[post_title] => An Anatomy of the Oil Pricing System
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => an-anatomy-of-the-oil-pricing-system-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:06:27
[post_modified_gmt] => 2016-02-29 15:06:27
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/an-anatomy-of-the-oil-pricing-system-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[80] => WP_Post Object
(
[ID] => 28252
[post_author] => 1
[post_date] => 2010-06-01 00:00:23
[post_date_gmt] => 2010-05-31 23:00:23
[post_content] => This presentation examines the evolution of OPEC in the last 50 years and identifies some of the important structural changes in the oil market that has influenced OPEC behaviour. The presentation highlights the changing and evolving role of OPEC and proposes new approaches to analyse OPEC’s role in the oil price formation process.
[post_title] => OPEC at 50: Evolution, Issues and Lessons
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => opec-at-50-evolution-issues-and-lessons-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:05:56
[post_modified_gmt] => 2016-02-29 15:05:56
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/opec-at-50-evolution-issues-and-lessons-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[81] => WP_Post Object
(
[ID] => 27619
[post_author] => 1
[post_date] => 2010-03-01 00:00:02
[post_date_gmt] => 2010-03-01 00:00:02
[post_content] => This comment analyses the oil price dynamics in 2009 arguing that 2009 represents a remarkable year in at least two respects: it witnessed the sharpest increase in spot oil prices in decades; and in the second half of 2009 it exhibited a high degree of relative stability despite a very uncertain and volatile global economic environment. The 2009 price dynamics indicate that the existing frameworks for the analysis of oil prices need to be modified to take into account new features of the market and the interaction among the various players. Furthermore attempts to identify the relative importance of fundamentals versus speculation in explaining the last price cycle are of limited use. Instead one should attempt to endogenise the role of financial players and understand the conditions under which these players behave in certain ways.
[post_title] => Price Formation in Oil Markets: Some Lessons from 2009
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => price-formation-in-oil-markets-some-lessons-from-2009
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:04:29
[post_modified_gmt] => 2016-02-29 15:04:29
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/price-formation-in-oil-markets-some-lessons-from-2009/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[82] => WP_Post Object
(
[ID] => 27621
[post_author] => 1
[post_date] => 2010-02-01 00:00:20
[post_date_gmt] => 2010-02-01 00:00:20
[post_content] => The recent behaviour of prices has polarised views about the key drivers of oil prices. One view attributes the recent behaviour in oil prices to structural transformations in the fundamentals of the oil market. An alternative view considers that oil markets have been distorted by substantial and volatile speculative financial flows. This dichotomy between fundamentals and speculation currently dominates the policy debate about the appropriate measures needed to reduce oil price volatility and to prevent a repeat of the latest price cycle. While it is convenient for some policy makers and analysts that the issues are presented in terms of this dichotomy it is too simplistic to be of use in formulating policy. Instead this presentation offers a more inclusive framework which emphasises the interactions among the various oil price determinants and the various players in the oil market. It also provides an alternative perspective on the oil price formation process based on perceptions of limited feedbacks and e increasing role of expectations and public signals.
[post_title] => The Oil Market Through the Lens of the Latest Oil Price Cycle
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-oil-market-through-the-lens-of-the-latest-oil-price-cycle
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:04:24
[post_modified_gmt] => 2016-02-29 15:04:24
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-oil-market-through-the-lens-of-the-latest-oil-price-cycle/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[83] => WP_Post Object
(
[ID] => 27622
[post_author] => 1
[post_date] => 2010-02-01 00:00:05
[post_date_gmt] => 2010-02-01 00:00:05
[post_content] => This presentation analyses some of the key relationships that are important for understanding global oil demand dynamics. It discusses the income and price determinants of oil demand as well as non-price factors such as the impact of government policies and other factors external to the oil market and which can have a drastic impact on oil demand. It emphasises that the relationship between oil demand and these determinants is far from linear and any analysis of oil markets should take into account non-linear and threshold effects and the cumulative and possibly irreversible nature of some of these effects.
[post_title] => Global Demand Dynamics: Determinants and Policy Issues
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => global-demand-dynamics-determinants-and-policy-issues
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:04:16
[post_modified_gmt] => 2016-02-29 15:04:16
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/global-demand-dynamics-determinants-and-policy-issues/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[84] => WP_Post Object
(
[ID] => 28268
[post_author] => 1
[post_date] => 2010-01-01 00:00:35
[post_date_gmt] => 2010-01-01 00:00:35
[post_content] => During the period 2002 to 2008, the oil market experienced a sustained increase in prices with the annual average price rising year-on-year for seven consecutive years. This boom, however, ended with a spectacular collapse towards the end of 2008. These sharp price movements captured public and political attention and raised concerns within both major consumers and producers about the adverse economic, political and social consequences of such violent price movements.
[post_title] => Oil Market Dynamics through the Lens of the 2002-2009 Price Cycle
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => oil-market-dynamics-through-the-lens-of-the-2002-2009-price-cycle-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 15:03:58
[post_modified_gmt] => 2016-02-29 15:03:58
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/oil-market-dynamics-through-the-lens-of-the-2002-2009-price-cycle-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[85] => WP_Post Object
(
[ID] => 28283
[post_author] => 1
[post_date] => 2009-07-01 00:00:52
[post_date_gmt] => 2009-06-30 23:00:52
[post_content] => The proposal for a crude oil price band seems to be gathering support. This comment discusses some of the limitations of an oil price band then it proposes a new framework for understanding the recent dynamics of oil price movements based on feedbacks. Rather than aiming at stabilising spot prices within a band the comment argues that the main objective of both oil importing and exporting governments should be to stabilise market participants' long term expectations. This requires a move away from focusing solely on the role of speculation and transparency issues towards a more general framework that also takes into account the inflexibilities in the oil market.
[post_title] => The Price Band and Oil Price Dynamics
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-price-band-and-oil-price-dynamics-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:54:07
[post_modified_gmt] => 2016-02-29 14:54:07
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-price-band-and-oil-price-dynamics-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[86] => WP_Post Object
(
[ID] => 27652
[post_author] => 1
[post_date] => 2009-03-01 00:00:15
[post_date_gmt] => 2009-03-01 00:00:15
[post_content] => While the media often focuses on the sharp swings in oil price, there have been some interesting reinforcing feedbacks unfolding in the term structure of oil prices affecting the international pricing system, financial investment, inventories and OPEC behaviour. These feedbacks are not new to the oil market, but the current environment seems to have amplified these price distortions. This comment discusses some of these feedbacks and price distortions and tries to draw some lessons from the period 1997-2009.
[post_title] => Reinforcing Feedbacks, Time Spreads and Oil Prices
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => reinforcing-feedbacks-time-spreads-and-oil-prices
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:51:53
[post_modified_gmt] => 2016-02-29 14:51:53
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/reinforcing-feedbacks-time-spreads-and-oil-prices/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[87] => WP_Post Object
(
[ID] => 27655
[post_author] => 1
[post_date] => 2009-02-01 00:00:41
[post_date_gmt] => 2009-02-01 00:00:41
[post_content] => This presentation, by Bassam Fattouh, challenges some of the conventional wisdom regarding the role of OPEC and analyses the Organisation's role in the short-term management of the oil market and its behaviour over the oil price cycle. It also discusses some of the transformations in the oil market and how these pose long term challenges for OPEC.
[post_title] => OPEC Policy and Oil Prices: Long Term Issues versus Short Term Management of the Market
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => opec-policy-and-oil-prices-long-term-issues-versus-short-term-management-of-the-market
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:51:38
[post_modified_gmt] => 2016-02-29 14:51:38
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/opec-policy-and-oil-prices-long-term-issues-versus-short-term-management-of-the-market/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[88] => WP_Post Object
(
[ID] => 28300
[post_author] => 1
[post_date] => 2009-02-01 00:00:20
[post_date_gmt] => 2009-02-01 00:00:20
[post_content] => On October 9 2009 the Oxford Institute for Energy Studies held a one-day conference in Oxford on 'Oil Price Volatility: Causes and Measures of Mitigation Strategies'. The conference focused on three themes: the role of fundamentals and financial factors in explaining the recent sharp swings in oil prices and the marked increase in price volatility; an assessment of the plans and strategies currently pursued to dampen oil price volatility; and the potential measures that could be adopted to mitigate the impact of sharp swings in the oil price on the energy industry. The group of participants included key senior figures from government oil companies the financial industry and academia. The conference was conducted under the Chatham House Rule of non-attribution. This presentation introduced the themes for the day.
[post_title] => The Oil Market Through the Lens of the Latest Oil Price Cycle: Issues and Proposals
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-oil-market-through-the-lens-of-the-latest-oil-price-cycle-issues-and-proposals-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:51:25
[post_modified_gmt] => 2016-02-29 14:51:25
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-oil-market-through-the-lens-of-the-latest-oil-price-cycle-issues-and-proposals-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[89] => WP_Post Object
(
[ID] => 27662
[post_author] => 1
[post_date] => 2009-01-01 00:00:01
[post_date_gmt] => 2009-01-01 00:00:01
[post_content] => Understanding the variation in the spread between the futures price and the spot price (known as the basis) is important for efficient hedging and for explaining the dynamics of commodity spot prices. Classical studies based on the theory of storage explain the variation in the basis in terms of changes in the fundamentals of supply and demand and/or storage technology of the underlying commodity (Kaldor, 1939; Working, 1948; Brennan, 1958; and Telser, 1958). Other studies explain the variation in the basis in terms of time-varying risk premiums which are influenced by preferences and beliefs of participants in the futures markets (Bailey and Chan, 1993). While the basis is relatively stable when compared to the variability of spot or futures prices, it may exhibit large variability for some commodities and may follow different dynamics depending on the behaviour of stocks of the underlying commodity.
[post_title] => Basis Variation and the Role of Inventories: Evidence from the Crude Oil Market
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => basis-variation-and-the-role-of-inventories-evidence-from-the-crude-oil-market
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:50:39
[post_modified_gmt] => 2016-02-29 14:50:39
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/basis-variation-and-the-role-of-inventories-evidence-from-the-crude-oil-market/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[90] => WP_Post Object
(
[ID] => 28308
[post_author] => 1
[post_date] => 2008-11-14 15:34:51
[post_date_gmt] => 2008-11-14 15:34:51
[post_content] => The oil sectors in the North African countries of Algeria, Libya, Egypt and Sudan have witnessed major transformations in the past decade or so. In Algeria, government reforms in the mid 1980s resulted in the entry of a wide range foreign oil companies to an oil sector previously dominated by the state-owned oil company. In Libya, the lift of US sanctions and the opening of the oil sector to foreign investment through a series of licensing rounds created a new dynamism not seen since the mid 1950s when the country’s oil industry kicked off. Egypt’s oil policy of building partnerships with foreign oil companies makes it one of the most attractive countries for foreign investment despite its mature oilfields. In Sudan, Asian national oil companies transformed the prospects of the country’s oil sector. Since 1999, Sudan’s oil production has been rising steadily enabling the country to join the club of oil exporters.
[post_title] => North African Oil and Foreign Investment in Changing Market Conditions
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => north-african-oil-and-foreign-investment-in-changing-market-conditions-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:50:24
[post_modified_gmt] => 2016-02-29 14:50:24
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/north-african-oil-and-foreign-investment-in-changing-market-conditions-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[91] => WP_Post Object
(
[ID] => 27669
[post_author] => 1
[post_date] => 2008-10-01 00:00:53
[post_date_gmt] => 2008-09-30 23:00:53
[post_content] => Since the early 1970s, OPEC has been central to understanding the dynamics of oil prices. With the shift to the futures market for oil price determination, OPEC has also become important in understanding the changes in the shape of the futures curve and expectations about changes in long term oil prices. At this critical juncture, it is important to assess OPEC actions during the last cycle as events in the past three years or so highlight some interesting features of OPEC behaviour. These observations help us identify the channels through which OPEC interacts with the market and understand how OPEC is likely to react to the current slide in oil prices.
[post_title] => To Cut or not to Cut: The Dilemma Facing OPEC
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => to-cut-or-not-to-cut-the-dilemma-facing-opec
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:45:31
[post_modified_gmt] => 2016-02-29 14:45:31
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/to-cut-or-not-to-cut-the-dilemma-facing-opec/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[92] => WP_Post Object
(
[ID] => 27674
[post_author] => 1
[post_date] => 2008-06-01 00:00:05
[post_date_gmt] => 2008-05-31 23:00:05
[post_content] => In this presentation, Christopher Allsopp and Bassam Fattouh discuss the recent rise in oil prices to around $135 per barrel, arguing that the diminution of feedbacks has destabilised long term expectations of oil prices. This has resulted in an unlocking of the back end of the futures curve, leading to ‘indeterminacy’ and great uncertainty about ‘fundamentals’ – a situation which can lead to volatility and drifts in the oil price responding to quite small changes in ‘news’ about supply, demand or OPEC behaviour.
[post_title] => Oil Prices: fundamentals or speculation?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => oil-prices-fundamentals-or-speculation
[to_ping] =>
[pinged] =>
[post_modified] => 2016-03-01 15:27:24
[post_modified_gmt] => 2016-03-01 15:27:24
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/oil-prices-fundamentals-or-speculation/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[93] => WP_Post Object
(
[ID] => 27683
[post_author] => 1
[post_date] => 2008-03-01 00:00:59
[post_date_gmt] => 2008-03-01 00:00:59
[post_content] => In this comment, Bassam Fattouh re-assesses the prospects of DME's Oman Crude Oil Futures Contract by focusing on three aspects: retroactive pricing, physical delivery and liquidity. He argues that in terms of providing better tools for risk management, enhancing price transparency and constituting the basis of a new benchmark, the DME's contract has not made any significant breakthroughs and that so far the main success of the DME contract has been in providing a flexible way to access physical Oman crude oil.
[post_title] => Prospects of the DME Oman Crude Oil Futures Contracts
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => prospects-of-the-dme-oman-crude-oil-futures-contracts
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:44:00
[post_modified_gmt] => 2016-02-29 14:44:00
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/prospects-of-the-dme-oman-crude-oil-futures-contracts/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[94] => WP_Post Object
(
[ID] => 28336
[post_author] => 1
[post_date] => 2008-01-01 00:00:08
[post_date_gmt] => 2008-01-01 00:00:08
[post_content] => Despite the wide variety of internationally traded crude oils with different qualities and
characteristics (the 2006 International Crude Oil Market Handbook describes more than 160
traded crude oil streams), many observers consider the world oil market as ‘one great pool’
(Adelman, 1984). Others argues that oil markets are ‘globalized’ in the sense that supply and
demand shocks that affect prices in one region are transferred into other regional markets
(Weiner, 1991). One implication of the globalization thesis is that prices of similar crudes in
different markets should move closely together such that their price differential is more or
less constant. This is in contrast to oil markets being ‘regionalized’ in which oil prices of
similar qualities move independently to each other in response to shocks. Whether the oil
market is one great pool or is regionalized has important implications in terms of energy
policy and market efficiency. For instance, Weiner (1991) argues that the effectiveness of
government policies, such as releasing crude oil from the Special Petroleum Reserve (SPR),
depends to a large extent on whether the impact of such policy action extends to other regions
or remains confined to the US market. In terms of efficiency, Gülen (1999) argues that
regionalization gives rise to arbitrage opportunities across local oil markets and may render
the market inefficient if arbitrage fails to push prices of similar crude oils in different markets
in line with each other.
[post_title] => The Dynamics of Crude Oil Price Differentials
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-dynamics-of-crude-oil-price-differentials-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:20:46
[post_modified_gmt] => 2016-02-29 14:20:46
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-dynamics-of-crude-oil-price-differentials-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[95] => WP_Post Object
(
[ID] => 28344
[post_author] => 1
[post_date] => 2007-09-01 00:00:12
[post_date_gmt] => 2007-08-31 23:00:12
[post_content] => During the 1980s and 1990s, energy security declined in importance as oil prices fell
and spare capacity stood at high levels. This was reversed in the decade that followed
and once more energy security became a priority in policy agendas of most oilimporting
countries. High oil prices, threats of terrorist attacks, instability in many
oil-exporting countries and the rise in so-called ‘oil nationalism’ have raised serious
concerns about the security of oil supplies. In the background, there are fears that the
world may be running out of oil with many observers predicting an imminent oil
supply crunch (Campbell and Laherrère, 1998) and raising doubts about the size of
proven oil reserves in the Middle East and elsewhere (Simmons, 2005). These doomladen
predictions about the availability of oil supplies and the size of reserves are
gaining popular credence at times when oil market conditions are tight. Many
international agencies, such as the Energy Information Administration (EIA) and
International Energy Agency (IEA), are also predicting a healthy growth in global oil
demand in the next 20–25 years, driven primarily by high growth rates of non-OECD
Asian economies.
[post_title] => How Secure are Middle East Oil Supplies?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => how-secure-are-middle-east-oil-supplies-2
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:13:29
[post_modified_gmt] => 2016-02-29 14:13:29
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/how-secure-are-middle-east-oil-supplies-2/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[96] => WP_Post Object
(
[ID] => 27705
[post_author] => 1
[post_date] => 2007-08-01 00:00:02
[post_date_gmt] => 2007-07-31 23:00:02
[post_content] => Although Iran has many tools for deterrence or retaliation at its disposal, contrary to what many analysts believe, the oil weapon is not one of them. There are serious costs and risks associated with the use of the oil weapon. It is not always effective; it is indiscriminate; and it cannot be sustained for a long period of time. It is certainly not one of Iran’s strongest tools with which to confront the US.
[post_title] => The Myth of the Iranian Oil Weapon
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => the-myth-of-the-iranian-oil-weapon
[to_ping] =>
[pinged] =>
[post_modified] => 2007-08-01 00:00:02
[post_modified_gmt] => 2007-07-31 23:00:02
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/the-myth-of-the-iranian-oil-weapon/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[97] => WP_Post Object
(
[ID] => 27711
[post_author] => 1
[post_date] => 2007-04-01 00:00:32
[post_date_gmt] => 2007-03-31 23:00:32
[post_content] => The recent disconnection of WTI from the other benchmarks revived the debate on whether the WTI benchmark has been ‘broken’ and whether oil market participants should adopt an alternative benchmark that better reflects the supply demand balance in the oil market. In this article, the author discusses the reasons for the WTI disconnection and its implications on the behaviour of oil price differentials. The author concludes that despite its drawbacks, WTI will continue to serve as one of the main international benchmarks for pricing crude oil as long as market players have an interest in its survival.
[post_title] => WTI Benchmark Temporarily Breaks Down: Is it really a Big Deal?
[post_excerpt] =>
[post_status] => publish
[comment_status] => closed
[ping_status] => closed
[post_password] =>
[post_name] => wti-benchmark-temporarily-breaks-down-is-it-really-a-big-deal
[to_ping] =>
[pinged] =>
[post_modified] => 2016-02-29 14:12:33
[post_modified_gmt] => 2016-02-29 14:12:33
[post_content_filtered] =>
[post_parent] => 0
[guid] => https://www.oxfordenergy.org/wpcms/publications/wti-benchmark-temporarily-breaks-down-is-it-really-a-big-deal/
[menu_order] => 0
[post_type] => publications
[post_mime_type] =>
[comment_count] => 0
[filter] => raw
)
[98] => WP_Post Object
(
[ID] => 27752
[post_author] => 1
[post_date] => 2007-03-01 00:00:30
[post_date_gmt] => 2007-03-01 00:00:30
[post_content] => Since the 1973 oil price shock, the history and behaviour of the Organization of Petroleum Exporting Countries (OPEC) have received considerable attention both inthe academic literature and in the media.1 Many conflicting theoretical and empirical interpretations about the nature of OPEC and its influence on world oil markets have been proposed. The debate is not centred on whether OPEC restricts output, but the reasons behind these restrictions. Some studies emphasize that production decisions are made with reference to budgetary needs which in turn depend on the absorptive capacity of the domestic economies (Teece, 1982). Others explain production cuts in the 1970s in terms of the transfer of property rights from international oil companies to governments which tend to have lower discount rates (Johany, 1980; Mead, 1979). Others explain output restrictions in terms of coordinated actions of OPEC members. Within the literature, OPEC behaviour ranges from classic textbook cartel to twoblock cartel (Hnyilicza and Pindyck, 1976), to clumsy cartel (Adelman, 1980), to dominant firm (Salant, 1976; Mabro, 1991), to loosely co-operating oligopoly, to residual firm monopolist (Adelman, 1982) and most recently to bureaucratic cartel (Smith, 2005). Others have suggested that OPEC oscillates between various positions
but always acts as a vacillating federation of producers (see for instance Adelman, 1982; Smith, 2005). The existing empirical evidence has not helped narrow these different views. Griffin’s (1985) observation in the mid-1980s that the empirical studies tend to “reach onto the shelf of economic models to select one, to validate its choice by pointing to selected events not inconsistent with model’s prediction” still dominates the empirical approach to studying OPEC behaviour and its pricing power.
[post_title] => OPEC Pricing Power: The Need for a New Perspective
[post_excerpt] =>
[post_status] => publish
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[post_content] => The behaviour of oil prices has received special attention in the current environment of rapid rises and marked increase in oil price volatility. It is widely believed that high oil prices can slow economic growth, cause inflationary pressures and create global imbalances. Volatile oil prices can also increase uncertainty and discourage muchneeded investment in the oil sector. High oil prices and tight market conditions have also raised fears about oil scarcity and concerns about energy security in many oilimporting countries.
[post_title] => The Drivers of Oil Prices: The Usefulness and Limitations of Non-Structural model, the Demand–Supply Framework and Informal Approaches
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[post_content] => In this presentation, Dr Bassam Fattouh discusses three main approaches for analyzing oil prices: non-structural models, the supply-demand framework, and the informal approach. While non-structural models rely on the theory of exhaustible resources as the basis for understanding the oil market, the supply-demand framework uses behavioural equations that link oil demand and supply to its various determinants such as GDP growth, prices, and oil reserves. The informal approach on the other hand analyses oil price movements within specific contexts and episodes of oil market history. The latter approach is then used to identify some factors that have affected oil prices movements in recent years and analyses whether these drivers reflect structural changes in the oil market. This presentation is based on a paper titled: The Drivers of Oil Prices: The Usefulness and Limitations of Non-structural, Supply-Demand and Informal Approaches.
[post_title] => Analysing Oil Prices
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[post_content] => One striking feature in the current market has been the prolonged contango in the WTI forward curve. Dr Bassam Fattouh assesses the various explanations that have been put forward to explain the current contango in crude oil markets.
[post_title] => Contango Lessons
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[post_content] => In this presentation, Dr Bassam Fattouh assesses the recent behaviour of oil prices focusing on ten relationships between oil prices and the market.
[post_title] => Oil Prices and Markets
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[post_content] => In this comment, Dr Bassam Fattouh considers whether the proposed Oman oil futures contract to be launched later this year satisfies the necessary conditions for it to play the role of a benchmark in pricing Middle Eastern crude oil exports to Asia.
[post_title] => Middle East Crude Pricing and the Oman Crude Oil Futures Contract: A Critical Assessment
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[post_content] => Earlier this year in Caracas, OPEC announced that it would leave its production quota unchanged. However, not everyone is convinced by OPEC’s recent announcement. Some observers believe that OPEC members have already reduced their supplies to keep inventories in check and they are doing this by not discounting their heavy crude oils. This comment explores the argument that OPEC may resort to reducing discounts on its heavy oil to reduce oil supplies in what is believed to be an oversupplied market.
[post_title] => OPEC’s Discounts on Heavy Crude Oil: Is a New Policy Instrument Taking Shape?
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[post_content] => Spare Capacity, Oil Prices and the Macroeconomy by Dr. Bassam Fattouh for Oxford Economic Forecasting’s conference ‘Global Macro and Industrial Outlook’ held in London on 6-7 June 2006.
[post_title] => Spare Capacity, Oil Prices and the Macroeconomy
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[post_content] => Oil market sentiment has turned very bearish over the last few weeks. The Brent price has fallen from highs of above $80/barrel in October to currently trading close to $60/barrel, global economic prospects have become highly uncertain, Saudi Arabia’s production is at record level of above 11.1 mb/d in November, Russia and other OPEC+ members that could increase production are producing at or close to maximum capacity, the range of estimates of Iranian losses remain very wide, OECD liquids stocks have returned to above their 5-year average, net-length financial positioning has fallen sharply, US shale output keeps surprising on the upside, and President Trump’s tweets about OPEC and oil prices have become a regular occurrence. Thus, when OPEC+ members meet next in December, they find themselves in a very different environment than the June 2018 meeting when the market’s main concern at the time was whether Saudi Arabia has enough spare capacity to put a cap on the oil price. In contrast, in the forthcoming OPEC meeting, the market concern is whether OPEC and its partners will implement deep enough cuts to reverse the recent decline in the oil price. This short presentation assesses the various choices that OPEC and its key player Saudi Arabia face.
Executive Summary
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Latest Publications by Bassam Fattouh

Oil market sentiment has turned very bearish over the last few weeks. The Brent price has fallen from highs of above $80/barrel in October to currently trading close to $60/barrel, global economic prospects have become highly uncertain, Saudi Arabia’s production is at record level of above 11.1 mb/d in November, Russia and other OPEC+ members […]

One of the major features of the latest oil price cycle has been the strengthened relationship and close coordination between two of the world’s largest oil producers: Russia and Saudi Arabia. This presentation analyses the evolution of Russia-Saudi Arabia oil relations and the prospects of this relationship from a Saudi perspective, by answering the following […]

This presentation given at the Centre for Strategic and International Studies (CSIS) discusses OPEC output cycles over the period 2008-2018 and how they have shaped the oil market outlook. It also outlines the main factors behind the rebalancing of the oil market and analyses the main trends shaping oil price outcomes in the short-term. The presentation concludes […]

This presentation and speech, was given by Bassam Fattouh at the Eleventh Arab Energy Conference, Marrakesh, Morocco, 1-4 October 2018, on Arab oil exporters’ diversification strategies in the context of the global energy transition. Speech – Economic diversification in the context of the energy transition

As OPEC’s Declaration of Cooperation with non-OPEC producers draws to a close (ending-2018), the future of this historic joint effort of 24 (now 25) OPEC and non-OPEC oil-producing countries has moved to the top of the producers’ agenda. The next Joint Ministerial Monitoring Committee’s meeting on September 23rd in Algiers, could provide some hints regarding […]

This presentation discusses the oil market outlook for 2018 and 2019. It outlines the main factors behind the rebalancing of the oil market, including stronger than expected global oil demand growth and strong OPEC cohesion (caused in part due to involuntary cuts). The presentation then analyses the main trends shaping oil price outcomes in the […]

After a sharp rise in April/May this year, which saw Brent trading at above $80/barrel for several days, the upward pressure on the oil price eased in July with the Brent structure flipping into contango. This may have come as a surprise to many analysts who were expecting oil prices to continue on their upward […]

Economic diversification has been a key developmental goal for the Middle East and North Africa (MENA) oil producers for decades as evidenced in their various national development plans. Some countries have made progress over the last few decades in diversifying their economic base and their sources of income. But despite these efforts, most indicators of […]

Earlier this month, Saudi Aramco announced that from October 2018 it will be changing the pricing formula it uses to price its long-term crude oil sales to Asia. Rather than using the equally weighted average prices for Dubai and Oman as assessed by pricing agency S&P Global Platts (referred to in this article as Platts […]

Resource-rich economies in the Middle East and North Africa (MENA) are pursuing two parallel strategies with regard to their electricity sectors: (i) increasing the role of renewables and integrating them into their power generation mix to mitigate the impact of rising domestic oil and gas demand on their economies and to boost their hydrocarbon export […]

As the OPEC oil ministers prepare to meet for their bi-annual Ordinary Meeting on 22 June, they are faced with some difficult choices. On the one hand, by extending the output cutbacks amidst a higher risk of output disruptions, OPEC risks overtightening the oil market and pushing oil prices higher, leading to an inevitable demand […]

The energy landscape is changing rapidly with far-reaching implications for global energy industries and actors, including oil companies and oil-exporting countries. These rapid changes introduce uncertainty in multiple dimensions, the most important of which is the speed of transition. While the transformation of energy systems is rapid in certain regions of the world, such as […]

Recent movements in oil prices, time spreads, and physical differentials have been sending some mixed signals both about current and long-term market fundamentals. This may reflect heightened uncertainty as well as a wide divergence of expectations about key factors shaping the oil market, both in the short-term and the medium-term, including the size of potential […]

President Trump’s recent decision to exit the Joint Comprehensive Plan of Action (JCPOA) and the expectation therefore of the loss of Iranian barrels has brought the fate of the OPEC+ deal to the fore. For some analysts, this signifies that ‘the current OPEC deal will end by end-2018’ while for others the impact may be felt as […]

In this presentation, Bassam Fattouh and Andreas Economou analyse the choices facing OPEC+ in light of OECD stocks falling, recent gains in oil prices, alongside concerns that OPEC may be over-tightening the market and with commentators warning that current high oil prices will have a negative impact on oil demand and suggesting that OPEC+ should […]

OPEC exit strategy has been one of the key uncertainties engulfing the oil market. Most market focus has been on the level of inventories, as this is seen by many as a key indicator as to when OPEC may shift its current output policy. In this presentation, it is argued that the level of inventories, […]

In this presentation, given at IP Week, Bassam Fattouh discusses the heightened geopolitical risks in the Middle East and North Africa (MENA) and the potential impacts, both short-and long-term, on oil and gas markets. He argues that the nature of geopolitical risks in the region has changed dramatically and that despite the defeat of the […]

2018 started on a positive note for oil markets with Brent prices breaking through $70 a barrel for a few days and all the key international crude oil benchmarks flipping into backwardation. Yet, there is still a wide uncertainty engulfing the oil market, with very divergent views among market observers about how the oil price […]

While the market has been focused on short-term issues such as OPEC’s success in rebalancing the market in 2018; its exit strategy after the expiry of the deal; and the risk that the market over-tightens, OPEC and its dominant player Saudi Arabia have been keen to shift the market focus towards the longer term. The […]

It is often implied that economic adjustments and structural reforms are very difficult in the context of rentier economies. Yet recent experience shows that in response to the declines in oil price and uncertainties surrounding oil markets, GCC countries have been able to introduce some limited reforms with relative ease and, so far, without much […]

The prospect that global oil demand will gradually slow and eventually peak has created a cottage industry of executives and commentators trying to predict the point at which demand will peak. In this Energy Insight, we argue that this focus seems misplaced. The date at which oil demand will stop growing is highly uncertain and […]

Using novel measures that decompose oil supply shocks into its exogenous supply (driven by exogenous geopolitical events in OPEC countries) and endogenous supply (driven by investment dynamics within the oil sector) components, this paper offers a fresh perspective on the role of supply, flow demand and speculative demand shocks in explaining the changes in the […]

Oil market sentiment has shifted considerably over the last few weeks. Brent is trading above $60 per barrel, the major benchmarks are in backwardation, stocks have been falling towards the five-year average, global oil demand remains strong, financial positioning is at record length, OPEC and non-OPEC compliance has been high, the additional Nigerian and Libyan […]

Oil rents have been central to shaping the political economy of the Gulf Corporation Council (GCC) countries. The basic analytical framework for analyzing the impacts of rents remains the Rentier State Theory (RST) despite some important refinements to this theory over the years. However, an area that has received little attention in the literature is the process […]

Earlier this week, Saudi Arabia, the UAE, Bahrain and Egypt cut diplomatic and economic ties with Qatar, accusing Qatar of supporting extremism. The measures are of unprecedented severity in modern GCC diplomacy with adverse consequences for Qatar, not least for its reputation as a business and international and regional transit hub and as host for […]

In the last few months, there has been a flurry of articles about the Initial Public Offering (IPO) of Saudi Aramco. While such articles offer a fresh perspective on the complexities involved in the IPO of Saudi Aramco, key issues are still missing in the debate. This short paper tries to fill some of these […]

This presentation, delivered at Chatham House, looks at the dynamics of investment in the Middle East’s oil and gas upstream sector following the recent fall in oil price. In contrast to most regions in the world that saw sharp cuts in capital expenditure, investment in the upstream oil and gas sector in the Middle East […]

This paper explores how the oil price path could evolve in 2017 by assessing the various oil price risks under alternative forecast scenarios pertaining to future market conditions. It is shown that even without the OPEC-non-OPEC output cut agreement in November 2016, the three-year long price fall would eventually have come to a halt and […]

This presentation delivered at the Department of Business, Energy & Industrial Strategy (BEIS) analyses the main factors shaping Saudi oil policy and the various phases of the Kingdom’s oil policy since the 2008 financial crisis. It is possible to identify four such phases: 1) In the aftermath of the 2008 financial crisis, Saudi Arabia decided to cut output in the face of a temporary demand shock […]

This comment argues that while Saudi Arabia has shown willingness to cooperate, this does not imply that the fundamentals of Saudi oil policy have necessarily changed nor that the kingdom would accept any deal irrespective of the key principles that have been guiding Saudi oil policy so far. Based on its historical record, it is […]

In 2015, oil demand growth, which surprised on the upside, was responsible for most of the adjustment in the oil market imbalance. In 2016, oil demand growth started slowing down and the baton of adjustment passed to non-OPEC supply, particularly US shale, which has declined sharply in recent months. So far, the OPEC cut feedback […]

As much of the world pushes ahead with the deployment of renewable energy, resource-rich MENA economies are lagging behind. For the region to catch up, new policies are required to remove barriers of entry to the industry and create investment incentives. This paper contends that while the main obstacles to deployment of renewables are grid […]

Structural reforms outlined in Vision 2030 are much needed to shift the economy to a more sustainable path and even if only a small part of Vision 2030 is being implemented, the Saudi economy will look very different in 2030 than it does now. The key question is whether these changes will have a substantial […]

The sharp fall in the oil price has divided views about the nature of the latest oil price cycle. Some argue that the oil market has been subject to structural shocks that have created a ‘new global oil order’ and that we have entered a world of ‘low oil prices for much longer’. Others are […]

In 2015, the Gulf Cooperation Council (GCC) countries began implementing and accelerating pricing reforms targeting the removal of energy subsidies. While the price increases were from a low base and domestic energy prices are still well below international levels and among the cheapest in the Middle East and North Africa (MENA) region, the recent increases […]

The accord reached by Saudi Arabia and Russia, along with Qatar and Venezuela, in Doha on February 16th has been widely seen as effectively an agreement to do nothing. The four countries have accepted a freeze in production based on January 2016 levels, but for most of them (with the exception of Saudi Arabia) this […]

On Wednesday January 27th Russian Energy Minister Alexander Novak met with a group of Russian oil companies to discuss the domestic and global energy markets, following which he announced that Russia would be prepared to discuss an output cut of 3-5% at a meeting with OPEC in February. On the face of it this would […]

This paper follows on from ‘Saudi Arabia’s Oil Policy: More than Meets the Eye?’ published in June 2015, which raised a set of fundamental questions in relation to the sharp drop in the oil price between June 2014 and January 2015, and OPEC’s decision, spearheaded by Saudi Arabia, not to cut output in response. We […]

In this presentation, given at the Bank of England, Bassam Fattouh looks at current developments in the oil market and explores some short and medium term prospects and concludes with the following observations: • It is important to be clear about causality; it is supply and demand imbalances that cause stocks to rise and for […]

The sharp drop in the oil price between June 2014 and January 2015 turned the world’s attention to Saudi Arabia’s role in the oil market and the determinants of its oil output policy. Initial hopes that Saudi Arabia would come to ‘rescue’ and ‘balance’ the market and put a floor under the oil price were […]

This short comment discusses how oil policy in the Arab world is often perceived by some parts of the western media, focusing on media coverage over the latest oil price cycle. An abridged version of this comment was presented at the 2nd GCC Petroleum Media Forum (Riyadh, Saudi Arabia, 22-24 March 2015).

This presentation outlines the current uncertainties engulfing the oil market focusing on two key dynamics: Saudi Arabia oil policies and the new dynamics unleashed by US shale production. It is argued that Saudi oil policy is rooted in fundamental features of Saudi Arabia’s political, economic and social systems. These include: • High dependency on oil […]

Energy subsidies are among the most pervasive, and most controversial fiscal policy tools in the Middle East and North Africa (MENA). In a region with few functioning social welfare systems, subsidized energy prices continue to form an important social safety net, albeit a highly costly and inefficient one. In the MENA region’s oil and gas […]

In this report published by the German Marshall Fund of the United States, Bassam Fattouh and Laura El-Katiri examines the prospects of Lebanon turning into a natural producer and exporter. Lebanon’s exclusive economic zone forms part of the Levant Basin, which has been estimated to hold up to 122 trillion cubic feet of recoverable natural […]

Recent changes in international oil prices have highlighted the issue of petroleum product pricing reforms in a number of non-OECD economies, particularly as the non-OECD now accounts for the bulk of the global growth in consumption of petroleum products. In 2014, oil demand from the non-OECD is predicted to overtake OECD oil demand for the […]

The Arab Energy Club organised a special session in Bahrain to celebrate and honour the work of Robert Mabro, the founder and former Director of the Oxford Institute for Energy Studies, and to look back at his lifetime contribution to the analysis of oil markets and his efforts to bring together the various stakeholders in […]

The sharp fall in oil prices in the last few weeks has turned the world’s attention to OPEC and particularly to Saudi Arabia’s response to the current slide in the oil price. Following unofficial communications to the market that Saudi Arabia is comfortable with markedly lower oil prices, even for an extended period, hopes that […]

While the impact of the increase in US production on prices and on oil market dynamics is yet to be fully felt, as some of the underlying forces still need time to unfold and need to be fully understood, it is important to provide a general framework to help us analyse the US shale revolution […]

The surge in natural gas liquids (NGLs) supply accompanying US shale production has notably underpinned the domestic petrochemicals industry with cheap plant feedstock, particularly in the form of ethane. This has allowed US plants to forge a competitive global position in ethylene production and ushered in a new era of investments in the US petrochemicals […]

While most recent analysis has focused on the potential impact of the US ‘tight oil’ revolution on global oil supplies and oil price levels, the impact on the shifts in trade flows and on the dynamics of price differentials has received much less attention. This is quite surprising, as the recent transformations in the US […]

Published paper can be found here One of the major developments associated with the US shale revolution and that has attracted little attention from market analysts is the sharp expansion in US liquefied petroleum gas (LPG) exports. Substantial increase in domestic supply has not only meant that US imports of LPG have dwindled, but the […]

Kuwait’s domestic electricity and water sector has been in disarray for several years, struggling with fast-rising demand for several decades as a result of rapid industrialization, population growth, rising living standards as well as due to the artificially low utility prices set by the government. We use a model-based methodology to compare the current pricing […]

The political turmoil that has swept across many parts of the Middle East and North Africa (MENA) since the beginning of the Arab Spring in December 2010 and the tightening of international sanctions against Iran in 2012 have reignited the recurring debate about energy security and the reliability of MENA as an energy supplier. In […]

This comment explores the links between Saudi Arabia’s export policy, US oil market balances, and the price dynamics of US benchmarks. The authors argue that one of the biggest surprises to the market has been the resilience of US crude import despite falling US prices. As a result, the fate of US benchmarks is not just […]

This comment analyses the recent refining dynamics in the GCC and their implications on local and global petroleum products markets and trade flows. The authors argue that the recent expansion plans in the GCC will have important implications on global petroleum products trade flows, constituting an additional source of competition for Asian and European refineries […]

Historically, the industry has had a very poor record in predicting oil prices and key fundamental shifts in the oil market, and this time is no different. Not only did most industry and oil market analysts fail to predict the scale of the tight oil revolution, but now that the pendulum has swung in the […]

In January 2013, the Government of India began deregulating the retail price of diesel by permitting Oil Marketing Companies to progressively raise retail prices over a period of several months, until their losses from the subsidization of diesel were completely offset. This policy decision represents one of the final stages of the ‘decontrol’ of prices […]

It’s that time of year again when Saudi Arabia’s domestic oil and gas consumption is in the limelight. Saudi Arabia faces sharp upward swings in oil demand during the summer, raising some market concerns about its export potential during the summer months. These sharp demand swings could influence oil prices, especially at times when the […]

The recent growth in US oil output has been impressive. From a negative annual growth in 2008, the US added around one million b/d in liquid production in 2012 with similar growth expected for 2013. Looking at global oil supplies from the US perspective gives the impression of plenty. However, in this presentation, Dr Fattouh […]

The main purpose of this paper is to review the evolution of OPEC models and to link this evolution to some key events in the oil market. Our main conclusion is that OPEC’s pricing power varies over time. There are many instances in which OPEC can lose the power to limit oil price movements – […]

Like no other region, energy resources have shaped the Arab world and its modern-day development trajectory. Endowed with some of the world’s most important oil and natural gas reserves, countries in the Arab world have over the past four decades produced and exported more oil than those of any other region, and hold reserves sufficient […]

The discovery of sizable gas resources in the Levant Basin, a geological structure that straddles the territorial waters of Cyprus, Israel, the Palestinian Territories, Lebanon, and Syria, has the potential to be game-changing for the East Mediterranean region. Hitherto net energy importers, these countries are now faced with the prospect of long-term energy self-sufficiency and […]

In the last decade, purely financial players with no interest in the physical commodity such as hedge funds, pension funds, insurance companies, and retail investors have become more prominent in oil futures and derivatives markets. In parallel, there has been an explosion in the variety of instruments that permit speculation in oil. These movements in […]

The main objectives of this paper are to assess whether financialization can impact oil market behaviour over and above structural fundamental changes, and whether these changes affect final consumers’ welfare. While shifts arising in financial investors’ preferences and wealth can explain the rise in participation of purely financial investors, they fail to explain key features […]

While higher fuel specifications and regulatory changes in the bunkers market are most likely to have a big impact on long-term fuel oil demand, a structural shift of a similar magnitude on the supply side is already taking place, particularly in Russia, the largest exporter of fuel oil. The Russian government’s firmly stated commitment to […]

The financialization of oil futures markets has been held responsible for a variety of phenomena including changes in price volatility, increased co-movement between oil futures prices and other financial asset and commodity prices, a breakdown of the statistical relationship between oil inventories and the price of oil, and an increased influence of the decisions of […]

To most analysts, the combination of geopolitical and economic factors constitutes a ‘perfect storm’ that will keep an upward pressure on oil the price for the rest of 2012. The purpose of this short article is to broaden the debate and consider some potential weaknesses in the dominant story. The article will highlight three main […]

A popular view is that the surge in the price of oil during 2003-08 cannot be explained by economic fundamentals, but was caused by the increased financialization of oil futures markets, which in turn allowed speculation to become a major determinant of the spot price of oil. This interpretation has been driving policy efforts to […]

Despite the existence of other regional crudes with a much larger physical base, more than 25 years have now passed, and most cargoes from the Gulf destined for Asia are still priced against Dubai. Nevertheless, the nature of the Dubai benchmark has evolved and many of the institutional and pricing details have witnessed major transformations, […]

This paper, authored by Bassam Fattouh and Laura El-Katiri and published by the United Nations Development Programme, explores the issue of energy subsidies in the Arab World. The authors argue that while energy subsidies may be seen as achieving social objectives (such as expanding energy access and protecting poor households’ incomes); economic objectives (such as […]

The exchange of threats between Iran and the West vis-à-vis Iranian oil exports to European and other consumer countries has received wide attention among policy makers and analysts; IMF officials predict that crude oil prices could increase by as much as 30 percent in case of a halt of Iran’s exports to OECD countries, and […]

The events that took place in the Arab world in the opening months of 2011 mark a watershed in the history of the Middle East and North Africa (MENA) region. Given the importance of MENA energy supplies in global economic terms, the political unrest witnessed by the region has caused widespread fears about the prospect […]

While much of the emphasis of the literature on energy poverty is on the prevalence of the phenomenon in sub-Saharan Africa and South Asia, little has been written about energy poverty in the Arab world. Traditionally having being seen as one of the world’s most energy rich regions, the Arab world has in recent years […]

This presentation analyses the impact of the recent oil market disruption on oil market dynamics and price behaviour. It makes the following observations. In historical perspective, the current oil market disruption has been small so far. However, the main concern for the market is the geopolitical context in which the disruption has occurred. There are […]

In this presentation, Dr Fattouh considers six key questions that are important for any analysis of the future evolution of OPEC: In a falling market how tolerant is OPEC or some of its players to a decline in market share? Will OPEC remain passive to oil substitution policies as a result of energy security and […]

One of the major features of the oil market during the 1990s was the relative stability of the long-term oil price. While the spot price and the price of near-term futures contracts sometimes exhibited sharp price volatility that volatility was only partially transmitted to the back end of the futures curve which was anchored around […]

The main purpose of this report is to analyse the main features of the current crude oil pricing system; to describe the structure of the main benchmarks currently used namely Brent West Texas Intermediate (WTI) and Dubai-Oman; to clearly identify the various financial layers that have emerged around these physical benchmarks; to analyse the links […]

On January 28 2011 the Oxford Institute for Energy Studies held a one-day conference on ‘Regulation of Oil Markets: Current Reforms and Implications’. The conference focused 1) The inter-linkages between the physical and financial layers in the current international oil pricing system and the role of these linkages in the oil price discovery process; 2) […]

The current oil pricing system has now survived for almost a quarter of a century, longer than the OPEC administered system did. While some of the details have changed, the fundamentals of the current system have remained the same since the mid 1980s. In the light of the 2008-2009 price swings, the current oil pricing […]

This presentation examines the evolution of OPEC in the last 50 years and identifies some of the important structural changes in the oil market that has influenced OPEC behaviour. The presentation highlights the changing and evolving role of OPEC and proposes new approaches to analyse OPEC’s role in the oil price formation process.

This comment analyses the oil price dynamics in 2009 arguing that 2009 represents a remarkable year in at least two respects: it witnessed the sharpest increase in spot oil prices in decades; and in the second half of 2009 it exhibited a high degree of relative stability despite a very uncertain and volatile global economic […]

The recent behaviour of prices has polarised views about the key drivers of oil prices. One view attributes the recent behaviour in oil prices to structural transformations in the fundamentals of the oil market. An alternative view considers that oil markets have been distorted by substantial and volatile speculative financial flows. This dichotomy between fundamentals […]

This presentation analyses some of the key relationships that are important for understanding global oil demand dynamics. It discusses the income and price determinants of oil demand as well as non-price factors such as the impact of government policies and other factors external to the oil market and which can have a drastic impact on […]

During the period 2002 to 2008, the oil market experienced a sustained increase in prices with the annual average price rising year-on-year for seven consecutive years. This boom, however, ended with a spectacular collapse towards the end of 2008. These sharp price movements captured public and political attention and raised concerns within both major consumers […]

The proposal for a crude oil price band seems to be gathering support. This comment discusses some of the limitations of an oil price band then it proposes a new framework for understanding the recent dynamics of oil price movements based on feedbacks. Rather than aiming at stabilising spot prices within a band the comment […]

While the media often focuses on the sharp swings in oil price, there have been some interesting reinforcing feedbacks unfolding in the term structure of oil prices affecting the international pricing system, financial investment, inventories and OPEC behaviour. These feedbacks are not new to the oil market, but the current environment seems to have amplified […]

This presentation, by Bassam Fattouh, challenges some of the conventional wisdom regarding the role of OPEC and analyses the Organisation’s role in the short-term management of the oil market and its behaviour over the oil price cycle. It also discusses some of the transformations in the oil market and how these pose long term challenges […]

On October 9 2009 the Oxford Institute for Energy Studies held a one-day conference in Oxford on ‘Oil Price Volatility: Causes and Measures of Mitigation Strategies’. The conference focused on three themes: the role of fundamentals and financial factors in explaining the recent sharp swings in oil prices and the marked increase in price volatility; […]

Understanding the variation in the spread between the futures price and the spot price (known as the basis) is important for efficient hedging and for explaining the dynamics of commodity spot prices. Classical studies based on the theory of storage explain the variation in the basis in terms of changes in the fundamentals of supply […]

The oil sectors in the North African countries of Algeria, Libya, Egypt and Sudan have witnessed major transformations in the past decade or so. In Algeria, government reforms in the mid 1980s resulted in the entry of a wide range foreign oil companies to an oil sector previously dominated by the state-owned oil company. In […]

Since the early 1970s, OPEC has been central to understanding the dynamics of oil prices. With the shift to the futures market for oil price determination, OPEC has also become important in understanding the changes in the shape of the futures curve and expectations about changes in long term oil prices. At this critical juncture, […]

In this presentation, Christopher Allsopp and Bassam Fattouh discuss the recent rise in oil prices to around $135 per barrel, arguing that the diminution of feedbacks has destabilised long term expectations of oil prices. This has resulted in an unlocking of the back end of the futures curve, leading to ‘indeterminacy’ and great uncertainty about […]

In this comment, Bassam Fattouh re-assesses the prospects of DME’s Oman Crude Oil Futures Contract by focusing on three aspects: retroactive pricing, physical delivery and liquidity. He argues that in terms of providing better tools for risk management, enhancing price transparency and constituting the basis of a new benchmark, the DME’s contract has not made […]

Despite the wide variety of internationally traded crude oils with different qualities and characteristics (the 2006 International Crude Oil Market Handbook describes more than 160 traded crude oil streams), many observers consider the world oil market as ‘one great pool’ (Adelman, 1984). Others argues that oil markets are ‘globalized’ in the sense that supply and […]

During the 1980s and 1990s, energy security declined in importance as oil prices fell and spare capacity stood at high levels. This was reversed in the decade that followed and once more energy security became a priority in policy agendas of most oilimporting countries. High oil prices, threats of terrorist attacks, instability in many oil-exporting […]

Although Iran has many tools for deterrence or retaliation at its disposal, contrary to what many analysts believe, the oil weapon is not one of them. There are serious costs and risks associated with the use of the oil weapon. It is not always effective; it is indiscriminate; and it cannot be sustained for a […]

The recent disconnection of WTI from the other benchmarks revived the debate on whether the WTI benchmark has been ‘broken’ and whether oil market participants should adopt an alternative benchmark that better reflects the supply demand balance in the oil market. In this article, the author discusses the reasons for the WTI disconnection and its […]

Since the 1973 oil price shock, the history and behaviour of the Organization of Petroleum Exporting Countries (OPEC) have received considerable attention both inthe academic literature and in the media.1 Many conflicting theoretical and empirical interpretations about the nature of OPEC and its influence on world oil markets have been proposed. The debate is not […]

The behaviour of oil prices has received special attention in the current environment of rapid rises and marked increase in oil price volatility. It is widely believed that high oil prices can slow economic growth, cause inflationary pressures and create global imbalances. Volatile oil prices can also increase uncertainty and discourage muchneeded investment in the […]

In this presentation, Dr Bassam Fattouh discusses three main approaches for analyzing oil prices: non-structural models, the supply-demand framework, and the informal approach. While non-structural models rely on the theory of exhaustible resources as the basis for understanding the oil market, the supply-demand framework uses behavioural equations that link oil demand and supply to its […]

One striking feature in the current market has been the prolonged contango in the WTI forward curve. Dr Bassam Fattouh assesses the various explanations that have been put forward to explain the current contango in crude oil markets.

In this comment, Dr Bassam Fattouh considers whether the proposed Oman oil futures contract to be launched later this year satisfies the necessary conditions for it to play the role of a benchmark in pricing Middle Eastern crude oil exports to Asia.

Earlier this year in Caracas, OPEC announced that it would leave its production quota unchanged. However, not everyone is convinced by OPEC’s recent announcement. Some observers believe that OPEC members have already reduced their supplies to keep inventories in check and they are doing this by not discounting their heavy crude oils. This comment explores […]

Latest research by Bassam Fattouh

Economic diversification has been a continuous topic of debate in the MENA economies. However, of late a sense of urgency has arisen around it due to two factors; rapid structural changes in global oil markets and structural shifts in oil trade flows, and, assertions around ‘peak demand’ with the world on the brink of another […]